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.

A previously unsettled aspect regarding the High Court’s (Court) jurisdiction to appoint an examiner to a company which is not formed or registered under the Companies Act 2014 (2014 Act), has been considered in the recent case of In the matter of MAC Interiors Ltd [2023] IEHC 395.

Earlier this year, a group of bondholders advised by William Fry and owed over US$175m by GTLK Europe DAC (GTLK Europe) and GTLK Europe Capital DAC (GTLK Capital) (collectively the Companies) petitioned for the winding up of the Companies on a number of grounds, including that they had failed to discharge scheduled interest payments and the accelerated debt constituted by the bonds following the interest payment defaults.

The High Court (Court) had to determine whether proceeds from two investments in the estate in the bankruptcy of Bernard McNamara (McNamara) were payable to NALM under its security package, or whether they should be retained in the estate in the bankruptcy of McNamara for the benefit of creditors generally (substantive question).

The High Court (Court) has found that it was not appropriate to make a winding up order in respect of a company under section 760(2) of the Companies Act 2014 (Act), where no party was nominated or consented to act as liquidator.

A recent Court of Appeal decision held that receivers are statutorily obliged to discharge preferential costs from assets available after deducting costs and expenses of a receiverirst line

The issue

Spotting the warning signs of distress in your construction supply chain and taking early action can significantly reduce the impact on your projects

While insolvency events may appear to arise suddenly, there are often warning signs or "red flags" of distress well in advance. While these do not necessarily demonstrate actual insolvency, they can indicate liquidity and solvency risks to the supply chain.

Early contingency planning can significantly reduce the shock of customer or supplier insolvency

In this edition of our distressed supply chains series, we consider the three key factors in contingency planning for potential insolvency in the supply chain, being (i) early planning analysis and due diligence, (ii) regular monitoring of key supply chain relationships; and (iii) taking early action if something goes wrong.