Sanctions regulations won't prevent administration orders but may affect timings and require undertakings
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.
On 27 February 2024, the High Court sanctioned a restructuring plan (the Plan) proposed by CB&I UK Limited (CB&I), part of the global McDermott construction and engineering group (the Group). This is the first English restructuring plan to be approved after the Court of Appeal judgment in Adler (see our Alert) and follows the guidance in that case.
Background
On 23 January 2024, the Court of Appeal overturned the High Court's sanction of Adler Group's (Adler) restructuring plan (the Plan) (see our alert). This much anticipated judgment provides clarity on the court's discretion to sanction a plan where there are dissenting classes of creditors.
Background
The Plan envisaged:
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).
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).