The UK High Court has excluded 'out of the money' creditors and shareholders from voting on Smile Telecoms Holdings Limited’s (Smile) restructuring plan because they did not have a genuine economic interest in the company.
Background
On 12 May 2021, in the first opposed cross-class cram down case, the English High Court sanctioned Virgin Active's restructuring plans, the first to bind landlords to lease compromises.
The decision
While the opposing landlords challenged the valuation evidence advanced by the companies, they did not advance evidence of their own. The court accepted the companies' evidence that:
On 17 May 2021, in the third of a trio of landlord challenge cases, the English High Court revoked Regis UK Limited's company voluntary arrangement (CVA) on one ground of unfair prejudice, but ruled against landlords seeking repayment of fees against the nominees.
The facts
On 10 May 2021, the English High Court rejected landlords’ challenge to the company voluntary arrangement (CVA) of fashion retailer, New Look. The New Look decision was the first in a trio of highly significant judgments focused on a distressed tenant's ability to compromise landlord's claims (our coverage of the Virgin Active and Regis decisions is available below).
The challenge
The landlords' challenge focused on jurisdiction, unfair prejudice and material irregularity as a result of the following:
IP licensing and insolvency reform: ipso facto clauses
Licensors of intellectual property rights may soon be unable to terminate licenses where the licensee has gone into an insolvency process.
What are ipso facto clauses and why do they matter?
Introduction
It is trite law that where a petition debt is disputed in good faith and on substantial grounds, the ordinary practice of the Court is to dismiss or strike out the winding up petition. However, this principle is more easily applied in theory than in practice. As a result, the Grand Court of the Cayman Islands has observed recently that "It is remarkable how much case law has been generated in relation to a legal test which has essentially been settled for many years" (Re Sky Solar Holdings Ltd).
Until the Cayman Islands introduces any changes to its corporate insolvency regime, with the COVID pandemic pushing many groups into the zone of insolvency, the following considerations remain relevant to structures involving a Cayman Islands entity:
How was the CIGB received?
Were there any concerns?
What has changed?
What else was proposed?
What's next?
A recap
After the Corporate Insolvency and Governance Bill (CIGB) was published on 20 May 2020, it raced through the House of Commons and House of Lords and, on 26 June 2020 (in under 6 weeks) came into force as the Corporate Insolvency and Governance Act 2020 (CIGA), with certain of the temporary measures taking effect from 1 March 2020.
How was the CIGB received?