UK members will want to monitor the situation and prepare for contingencies as US company experiences financial difficulties

On Monday 7 November 2023 WeWork Inc. filed for Chapter 11 bankruptcy in respect of its US business, and intends to file for recognition of those proceedings in Canada.

Early engagement, targeted information requests and use of the court's disclosure powers may assist consideration of whether to support or oppose a plan

Since their introduction in 2020, restructuring plans have become increasingly common in the retail and consumer sectors, including fitness centres (Virgin Active and Fitness First), casual dining (Prezzo) and, most recently, in greeting cards and gifting (Clintons).

Consent of secured creditors with no remaining economic interest is not needed to extend the administration of a company

Osborne Clarke recently advised the administrators in two reported High Court cases which have confirmed that a "secured creditor" under section 248 of the Insolvency Act 1986 should be construed in the present tense, retaining the status of secured creditor only if it is still owed a debt by the company in administration.

HMRC has taken an increasingly active role in opposing restructuring plans with which it does not agree

Previously in this series, we explored whether restructuring plans present an alternative to formal insolvency, as well as the court's ability to exercise a cross-class cram down on opposing creditors.

Even if the statutory conditions for cramming down the votes of dissenting creditors has been met, the court retains a discretion to consider other factors

Certain statutory conditions need to be met in order for the court to sanction a plan at least one class of creditors or members has not voted in favour of the plan by the requisite majority (being 75% in value of those present and voting) – referred to as the "cross-class cram down".

Demonstrating that dissenting creditors are no worse off under a contested restructuring plan than in the relevant alternative is an essential requirement for the court to exercise its power to sanction the plan

The power of the court to sanction a restructuring plan where one or more classes of creditors or members has not voted in favour of the plan by the requisite majority (being 75% in value of those present and voting) is referred to as the "cross-class cram down".

Demonstrating what would most likely happen if a restructuring plan were not sanctioned is an essential element for the exercise of the court's discretion to cram down the votes of dissenting creditors

Restructuring plans under Part 26A of the Companies Act 2006 (CA 2006) may provide an alternative for companies in financial distress to formal insolvency (see our previous Insight).

Restructuring plans can provide companies in the early stages of financial difficulty with a flexible alternative to entering a formal insolvency procedure

Under Part 26A of the Companies Act 2006 (CA 2006), companies or groups encountering financial difficulties affecting their ability to carry on business can propose a compromise or arrangement (a restructuring plan) which mitigates or eliminates the effects of those financial difficulties.

Early contingency planning can significantly reduce the shock of service provider/supplier insolvency in service/supply chains

In early November 2022, Made.com entered administration. Little over a year ago Made.com had floated with a valuation of £775 million. In mid-November 2022, Joules entered administration. Joules has 132 stores and around 1,700 employees.

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