Petrofac Ltd, Re [2025] EWHC 2887 (Ch) (27 October 2025)

Neutral Citation Number: [2025] EWHC 2887 (Ch) Ref. CR-2025-007516 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD) IN THE MATTER OF: PETROFAC LIMITED AND IN THE MATTER OF: THE INSOLVENCY ACT 1986 7 Rolls Buildings Fetter Lane London 27 October 2025 B e f o r e : THE HONOURABLE MR JUSTICE RICHARDS ____________________ PETROFAC LIMITED ____________________ MR D ALLISON KC, instructed by Linklaters LLP, appeared on behalf of the Company ____________________ HTML VERSION OF JUDGMENT (APPROVED) ____________________ Crown Copyright © MR JUSTICE RICHARDS: Background This is an application for an administration order of Petrofac Limited, a company incorporated in Jersey (the Company ). The application was made on an urgent basis on Sunday, 26 October, following the Company's announcement on 23 October of the termination of a key contract by a counterparty called TenneT. This is the most recent instalment in a somewhat tortuous and winding road for the Company in relation to its debt. A Part 26A plan was proposed and sanctioned at first instance, but the Court of Appeal reversed that decision. The Company is a holding company whose shares are listed on the London Stock Exchange. Its business therefore consists of holding shares in subsidiaries, providing management services and providing loans to other members of its group (the Group ). The main assets of that business therefore consist of shares in subsidiaries that themselves carry on businesses. Following the refusal by the Court of Appeal to sanction the Part 26A plan, the Company considered the viability of a sale of its business, or part of it, or raising additional funds. It became clear to the Company that there was a core of a viable business that could be sold, and that in turn led to a proposal that the senior creditors purchase the business of the Company in a pre-pack administration. That proposal was proceeding promisingly. Indeed, when considering the Company's application for permission to appeal against the Court of Appeal's order on the Part 26A plan, the Supreme Court refused permission on the basis that an appeal could be academic since the Company had reached agreement in principle on an alternative restructuring proposal. However, the landscape altered significantly when, on 17 October 2025, TenneT terminated a fundamental contract of the business, which meant that the pre-pack administration was no longer viable. Once the pre-pack administration was seen not to be viable, creditors of the Company began demanding payment of sums due, including a demand for some US$ 53 million of collateral. The application for an administration order is made in that context. I have detailed evidence as to the background, the Company's financial situation and other relevant matters in the witness statement of Mr Reis e Sousa, a director of the Company, and the Chief Financial Officer of the Group. The matters I must consider There are three principal requirements that must be met before I can make an administration order in relation to the Company: a. The Company must be unable (or likely to become unable) to pay its debts – see paragraph 11(a) of Schedule B1 to the Insolvency Act 1986 ( Schedule B1 ). b. The court must be satisfied that the administration order would be reasonably likely to achieve the purpose of administration – see paragraph 11(b) of Schedule B1. c. For my jurisdiction to be engaged at all, it must be shown that the Company has its "centre of main interest" ( COMI ) in the UK. Those are the necessary conditions to the exercise of the court's discretion to make an administration order in relation to the Company. If all of those conditions are met, I must be satisfied that it is a proper exercise of my discretion to make an administration order Condition 1 – inability to pay debts I apply the definition in section 123 of the Insolvency Act 1986 and the guidance of the Supreme Court in BNY Corporate Trustees Services Ltd v Eurosail-UK 2007-3BL plc [2013] UKSC 28 . I consider debts falling due from time to time and the reasonably near future. Mr Reis e Sousa's witness statement shows that there are clear and established defaults that have already taken place. The Company has not provided US$ 53 million of cash collateral that ABN Amro has demanded and which is contractually due. Some US$ 230 million of debt falls due for repayment on 3 November 2025 and Mr Reis e Sousa's evidence is that the Company lacks sufficient liquid assets to pay the amount due. Condition 1, in my judgment, is quite clearly satisfied. Condition 2 – purpose of the administration Condition 2 looks at the purpose of the administration. The Company does not seek to rely upon the first purpose because it recognises that its business cannot be continued as a whole as a going concern, following the termination of the key contract by TenneT. Rather, it focuses on the second condition, namely, asking whether it is "reasonably likely" that an administration would achieve a better outcome for creditors as a whole than would be likely if it were wound up (without first going into administration). In deciding whether the "reasonably likely" threshold is met, I apply the approach of Warren J at [3] of Auto Management Services Ltd v Oracle Fleet UK Ltd [2007] EWHC 392: "There has to be a real prospect that the administration order will achieve the purpose. This does not mean that I need to be satisfied that, on a balance of probabilities, there will be a better outcome on administration as compared with winding up. There has to be only a real prospect. It is not enough to show a real prospect that administration would achieve no worse an outcome. The prospect of a better result must be shown. However, I venture to think if an administration can be shown in all but the most unlikely circumstances to produce a result no worse than liquidation and if it can be shown there are reasonably possible circumstances in which administration can, in fact, produce a better result, so that paragraph 11(b) is satisfied, that will be a significant factor when it comes to exercising the discretion whether or not to make an order." There is clear force in the general proposition that an administrator has more and better tools in his toolbox than a liquidator because the business of a company can straightforwardly continue in an administration, but it cannot in a liquidation. Therefore, an administration would enable the Company's businesses, or parts thereof, to be sold relatively simply if buyers can be found. In this case, the Company is not just relying on that general statement. It points to the fact that the administrators have already been closely involved in attempts to sell parts of the Company's business, as part of the process that I described when giving the background to the application for administration. Shortly put, the proposed administrators know the Company's business and have been involved since August 2025 in attempts to sell parts of it. Of course, the termination of the TenneT contracts has altered the landscape, but the evidence suggests that there are parts of the business that are viable despite that termination. Following an administration order, the administrators will, no doubt, need to go back to those people with whom the Company did not proceed with in an early attempt to sell the business. There is also the prospect that an administration order will cause other people to emerge as potentially interested in purchasing viable parts of the Company's business. Mr Reis e Sousa's evidence satisfies me that a sale of part of the Company's business remains viable despite TenneT's termination of contracts. I am satisfied that it is "reasonably likely" that the second condition will be satisfied. I am reassured to note that the proposed administrators have confirmed, in their consents to act, that they share this view. Condition 3 - COMI I need to be satisfied that the Company is, indeed, a "company" for the purposes of paragraph 111(1A) to Schedule B1. Since the Company is not incorporated in the UK or an EEA state, that reduces to a consideration of whether its COMI is in the UK. The concept of COMI is defined in Regulation (EU) 2015/848 as it applies to the UK post-Brexit (the Recast Insolvency Regulation ). That definition provides: " The centre of main interests shall be the place where the debtor conducts the administration of its interests on a regular basis and which is ascertainable by third parties. In the case of a company or legal person, the place of the registered office shall be presumed to be the centre of its main interests in the absence of proof to the contrary. That presumption shall only apply if the registered office has not been moved from the United Kingdom to a Member State or to the United Kingdom from a Member State within the 3-month period prior to the request for the opening of insolvency proceedings ". Recital (28) to (30) to the Recast Insolvency Regulation emphasises the importance of creditors' perceptions: "(28) When determining whether the centre of the debtor's main interests is ascertainable by third parties, special consideration should be given to the creditors and to their perception as to where a debtor conducts the administration of its interests. This may require, in the event of a shift of centre of main interests, informing creditors of the new location from which the debtor is carrying out its activities in due course, for example by drawing attention to the change of address in commercial correspondence, or by making the new location public through other appropriate means . (29) This Regulation should contain a number of safeguards aimed at preventing fraudulent or abusive forum shopping. (30) Accordingly, the presumptions that the registered office, the principal place of business and the habitual residence are the centre of main interests should be rebuttable, and the relevant court of a Member State should carefully assess whether the centre of the debtor's main interests is genuinely located in that Member State. In the case of a company , it should be possible to rebut this presumption where the company's central administration is located in a Member State other than that of its registered office, and where a comprehensive assessment of all the relevant factors establishes, in a manner that is ascertainable by third parties, that the company's actual centre of management and supervision and of the management of its interests is located in that other Member State …" (emphasis added) The Company is incorporated in Jersey and has its registered office in Jersey. Therefore there is a presumption that its COMI is in Jersey. In this case, I see from Mr Reis e Sousa's evidence that the Company has its headquarters office in the UK. Negotiations and communications with creditors have generally taken place in the UK by which I mean that when physical meetings have taken place to discuss restructuring proposals, those have tended to take place in in London. Senior management of the Company, including Mr Reis e Sousa himself, is based in the UK. The Company has sent emails to all creditors telling them that with effect from 4 September 2025, all dealings with the Company in relation to its debts will take place in the UK. Overall, the evidence shows that the vast majority of work carried out in connection with the restructuring of the Company over the past two years has taken place, to the knowledge of creditors, in the UK. These are all powerful indications of a UK COMI. I do acknowledge that the articles of association of the Company contain a restriction on board meetings taking place in the UK, and that is a potential contraindication to the factors set out above. However, I agree that it is an indication of relatively slender weight in this case. In the first place, the creditors of the Company will not necessarily know where it holds its board meetings. Secondly, and more fundamentally, the way in which the Company chooses to pass board resolutions is not the focus of the test of COMI set out in the Recast Regulations. The question is how and where the Company deals with creditors in relation to their debt to the knowledge of the creditors themselves. I am quite satisfied that that place is in the UK. I consider that the presumption is rebutted and the Company's COMI is in the UK. Discretion All the conditions for the making of an administration order are satisfied. I see no reason to decline to exercise my discretion to make that order. I will therefore make an administration order. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII