Article Post on 27 May 2016

Preliminary comment on the "Hellas" judgment

Find below an excerpt of the article published in the ACE magazine 2016/04 (Ed. Kluwer, Luxembourg), contributed by Yann Payen, Director, Charles Krier, Director, and Thomas Biermeyer, Associate.

On 23 December 2015, the Luxembourg District Court, sitting in commercial matters (Tribunal d’Arrondissement de et à Luxembourg, siégeant en matière commerciale) (the “District Court”) has handed down a judgment which is, besides being of relevance in the context of the pan-European restructuration of the Hellas group of companies, most of all of prime interest for international investors in Luxembourg, in particular for those resorting to hybrid financing structures. Among many other (corporate law) issues addressed in the 2015 Judgment, the latter has indeed the merit of clarifying whether the redemption of so called convertible preferred equity certificates (“CPECs”) may be subject to articles 72-1 and 167 of the Luxembourg law of 10 August 1915 on commercial companies, as amended (the “Luxembourg Company Law”) governing the “distributions to shareholders”.

In a nutshell, the 2015 Judgment was rendered following the legal proceedings initiated by the liquidators of Hellas Telecommunications (Luxembourg) II S.C.A. (“Hellas II”) – a Luxembourg société en commandite par actions placed in liquidation proceedings under the English 1986 Insolvency Act – aiming at obtaining (i) the annulment of the decision of Hellas Telecommunications S.à r.l. (“Hellas”), acting as general partner (gérant commandité) of Hellas II, to redeem 27,321,600 CPECs out of the 33,808,736 CPECs issued by Hellas II at a price of 35.82 EUR per CPEC, so as the redemption operation itself, for violating the Luxembourg Company Law and (ii) the subsequent conviction of Hellas and Hellas Telecommunications I S.à r.l. (“Hellas I”, being the limited shareholder of Hellas II) to repay Hellas II a sum of 978,656,712 EUR (with legal interests). 

This note hence aims at examining the 2015 Judgment by first looking at the complex facts which gave rise to the decision (a clear understanding of which is a prerequisite to fully appreciate the decision of the judges) and then considering the decision itself, focusing more particularly on three different issues raised by the plaintiff to the case and their responses by the District Court, namely:

  1. the applicability of articles 72-1 and 167 of the Luxembourg Company Law to a CPECs redemption, which led the District Court to consider the very scope of those provisions and the nature of the “distributions” referred to hereunder;
  2. the question whether the CPECs redemption disputed in the case at hand did violate the corporate purpose of the issuer, i.e. Hellas II, which led the District Court to first define what the corporate interest of a company should be under Luxembourg law; and
  3. the effect of the discharge granted to Hellas as general partner of Hellas II, and the impact of such a discharge on the managers of Hellas.

More anecdotally, the 2015 Judgment is also noticeable because it is part of a larger odyssey of restructurings of the Hellas group of companies which involved COMI transfers of several group companies for insolvency law purposes from Luxembourg to the United Kingdom, with subsequent opening of restructuring proceedings. Finally, judicial proceedings have been started in the context of these restructurings in the United Kingdom and the United States providing the context in which the 2015 Judgment has to be understood. 


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