Creditors fight back against English schemes

Author: Lizzie Meager | Published: 10 May 2016

A series of recent cases suggest the use of English law schemes of arrangement (SOA) by foreign companies could be at risk.

Once nicknamed the bankruptcy brothel of Europe, businesses from across Europe have been coming to England to restructure their debt and avoid entering insolvency proceedings for many years now. The tool is especially valuable to companies incorporated in countries with particularly inflexible insolvency laws, where liquidation – sometimes of perfectly viable companies – is often pursued over rescue.

German steel company Scholz is the latest such company to shift its centre of main interest (Comi) to take advantage of an English SOA. In early 2016 it attempted a Comi shift by moving its headquarters, management and operations to London, but in a case brought by its creditors in April, a local German court ruled that its Comi remained firmly in Germany. While the ruling only applies if Scholz formally files...