Sufficient connection
M&A / Merger ModelThe jurisdictional threshold an English court applies before sanctioning a scheme or plan for a company incorporated elsewhere.
Also written: sufficient connection test
English schemes and plans are open to any body corporate liable to be wound up under English law, which is read broadly, so the practical gate is whether the company has a sufficient connection with England and Wales. It is a judicial test developed case by case rather than a statutory checklist.
Finance documents governed by English law have repeatedly been accepted as a sufficient connection, which is why groups with no English incorporation, operations or assets still use the procedure. Substantial assets here, a place of business, or a centre of main interests in England will also serve.
Where the connection is thin it is frequently created. Amending the governing law of the debt to English law, which the credit agreement normally permits with the consent of the required majority, is the standard route, and a connection engineered for the purpose has been accepted provided it is real.
Connection is not the whole test. The court also asks whether the plan will be effective, meaning recognised and given effect where the assets and creditors are. Since the UK left the EU recognition regimes, that question is answered with expert evidence on each relevant jurisdiction rather than by a regulation.
Worked example
A German group with no UK assets amends the governing law of its senior facility to English law with the consent of a majority of lenders, then proposes an English restructuring plan.
The English court accepts the connection. The harder question at sanction is whether the German courts will give effect to the outcome, so the company produces expert evidence that they will.