Australia: Bond holder consents: guidance from the English courts

Key Points:

Bondholders and bond issuers that are involved with (or contemplating) a bond restructure should be mindful of the issues pertaining to the use of consent payments and exit consents.

Two recent English decisions should make bondholders and bond issuers that are involved with (or contemplating) a bond restructure carefully consider how they deploy consent payments and exit consents.

Azevedo – consent payments acceptable

In Azevedo v Imcopa Importacao, Exportacao E Industria De Oleos Ltd [2013] EWCA Civ 364, the English Court of Appeal held that it was acceptable for a company to offer a "carrot" to bondholders to vote in favour of a restructuring proposal. Imcopa (the issuer) proposed resolutions postponing the payment of interest that was due under the bonds and offered a cash payment to bondholders who voted in favour of the resolution, in the event that the resolution passed. Those that did not vote in favour of the resolution or did not vote on the resolution at all were not entitled to receive the payment.

The claimants voted against the resolutions and argued that the offer and associated payments were unlawful as they were in breach of the pari passu principle, which was explicitly required by the Trust Deed, or alternatively they were a bribe and so were unlawful under English law.

The Court found that the pari passu obligation only applied to money in the hands of the Trustee and in this case the money did not pass through the hands of the Trustee.

As to the second argument, the Court found that it is not inconsistent with English company law for an offer of payment to be made to bondholders who vote in favour of a resolution, where payment is available to all members of the class and provided that the basis of the payment is made clear in the documents relating to the resolution.

The Court continued to state that it is inappropriate to speak of bribery in this context as the details of the scheme were fully disclosed to all bondholders and therefore no member of the class was excluded from participating in the benefits of the offer.

"Buying" the consent of bondholders

Azevedo is authority for consent payments being acceptable under English law on the condition that such payments are clearly disclosed and available equally to all bondholders of a particular class. We expect to see increased use of consent payments to facilitate debt restructuring as companies continue to struggle to manage their debt.

Assénagon – the exit consent was an unacceptable coercive threat

In Assénagon Asset Management S.A. v Irish Bank Resolution Corporation Ltd [2012] EWHC 2090 (Ch), the English High Court considered the use of "exit consents".

The issuer made an offer to exchange old bonds for new bonds (with different terms). To accept the exchange, bondholders were required to direct a proxy to vote in favour of the exchange and to amend the terms of the original bonds to allow the issuer to redeem them for nominal consideration (€0.01 per €1,000 in principal amount of the original bonds).

The deadline to accept the exchange offer was before the bondholder meeting. Bondholders that did not accept the exchange could not therefore wait for the outcome of the take-up of the exchange until deciding how to vote at the meeting as, by that time, there was insufficient time to have their voting instructions processed through the relevant clearing house / custodian.

The incentive to vote in favour of such a proposal is commonly known as an exit consent. Justice Briggs held that the process had not been validly undertaken and that it was unlawful for the majority bondholders to assist the coercion of the minority by voting for a resolution which would destroy the minority's value of their bonds:

"[an] exit consent is, quite simply, a coercive threat which the issuer invites the majority to levy against the minority, nothing more or less. Its only function is the intimidation of a potential minority, based upon the fear of any individual member of the class that, by rejecting the exchange and voting against the resolution, he (or it) will be left out in the cold."

Assénagon – broad implications

It is understood (and acknowledged in Assénagon) that exit consents have been increasingly used for the restructure of bonds governed by English law, particularly in relation to banks and other lending institutions requiring to be restructured following the GFC. This means that the Assénagon case may have much wider implications than just the dispute between the parties in this instance.

Assénagon appeal will not be pursued

It is noted in Azevedo that the previously foreshadowed appeal of the decision in Assénagon will not be pursued as the issuer has gone into special liquidation with the special liquidators deciding not to pursue the appeal.

These are English cases, what does it mean for me?

The above cases are likely to impact the way bonds governed by English law can be restructured.

While the decisions are not binding on Australian courts, it is recognised that English authorities generally can provide assistance to Australian courts and it can be expected that English Court of Appeal and English High Court decisions will be persuasive on Australian courts.

Both bondholders and issues should give careful consideration to the terms of any proposed restructure and assess their rights and the potential risks of challenge in light of these decisions.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.