Steinhoff International Holdings N.V. (SIHNV) global litigation settlement
Steinhoff International Holdings N.V. (SIHNV) and its subsidiaries (Steinhoff) has successfully achieved a global settlement of very substantial contingent liabilities arising out of the accounting irregularities first announced by Steinhoff in December 2017. Linklaters is proud to have supported Steinhoff International Holdings N.V. and its subsidiaries in achieving this very important milestone.
The settled liabilities consist of claims for damages in the billions of euros brought against Steinhoff and certain of its related parties related to the accounting irregularities. The litigants included a number of class action firms on behalf of institutions and individuals that had acquired Steinhoff shares in the public markets and “vendor claimants” that had sold their businesses to Steinhoff in exchange for shares. Multiple proceedings had been commenced in the courts of the Netherlands, South Africa and Germany, and certain claimants also filed a liquidation petition against SIHNV in South Africa. Steinhoff contested all such proceedings, and no adverse judgments on liability had been obtained by the time of the global settlement.
The Steinhoff global settlement:
- has been successfully implemented through inter-conditional statutory compromise plans launched pursuant to:
- a statutory Suspension of Payments proceeding in the Netherlands subject the oversight of the Amsterdam District Court; and
- an application to the Cape Town High Court for a scheme of arrangement made under s.155 of the South African Companies Act;
- entails the distribution of more than €1.5 billion by Steinhoff to litigation claimants in full and final settlement, primarily in cash with a smaller component in shares in the listed South African retailer, Pepkor Holdings Limited;
- achieves finality for all parties by encompassing claims against director and auditor defendants as well as Steinhoff, and entails financial contributions by D&O insurers and auditors on top of Steinhoff’s own contributions; and
- represents a number of significant legal innovations, including:
- the first ever settlement of mass litigation claims using a Dutch Suspension of Payments proceeding
- the successful appointment for only the second time of a committee of representation to vote on a Dutch composition plan
- one of the first s.155 schemes to be sanctioned by the South African courts and the first of this magnitude and complexity
- distinctive treatment between different creditors groups, i.e. financial creditors and litigation claimants in both the s.155 scheme and the Suspension of Payments proceeding
- the development of new case law for class action claims in South Africa (de Bruyn v SIHNV )
- the successful use of a s.155 scheme to restructure debt through the issuance of new financial instruments
- the use of a “bar date” for the filing of litigation claims to achieve settlement finality
- the use of third party release mechanics to facilitate external contributions to the settlement consideration
- the use of a Dutch Stichting to act as a claims administration and distribution vehicle.
The global settlement also entails the further extension of SIHNV’s financial indebtedness to June 2023 (with an option for further extension to December 2023 with further lender approval). Linklaters had previously advised Steinhoff following the announcements in December 2017 on its initial restructuring of its financial indebtedness via two inter-conditional Company Voluntary Arrangements under English law. That restructuring was successfully voted through in December 2018 and became fully effective in August 2019.
Linklaters also represented SIHNV in its litigation in the Dutch and German courts, as well as in the English court on a contested scheme of arrangement undertaken for the purpose of obtaining financial creditor consent to the global settlement.
The Linklaters team was led by restructuring and insolvency partners Richard Bussell and James Douglas (London) and Paul Kuipers (Amsterdam) and dispute resolution partners Daniella Strik (Amsterdam), Kerstin Wilhelm (Munich) and Rory Conway (London), assisted by a team of counsel and associates across relevant offices. South African legal advice was provided by Werksmans.