This case is a reminder to both debtors and nominees that corporate law formalities must be respected and that the insolvency lens may affect the treatment of connected party transactions in future valuations and restructuring processes.

The Regis landlords made multiple complaints regarding the disclosure and valuation of connected party transactions and the large uniform discount applied to multiple landlords for voting purposes (75%). The only argument found in their favour was the mistreatment of one of the intercompany loans.

Key takeaways -

On 12 May 2021, Mr Justice Snowden sanctioned Virgin Active’s three inter-conditional restructuring plans under Part 26A of the Companies Act 2006. The case has been followed with significant interest in the restructuring community because the restructuring plans included the most extensive cross-class cram down proposal since the introduction of the restructuring plan process last year (DeepOcean and Smile Telecoms are the only other restructuring plans to utilise the cram-down mechanism).

The government has introduced the Debt Respite Scheme (Breathing Space), which came into effect on 4 May 2021, which allows individuals who are struggling with debt to apply for a “breathing space” in which to sort out their finances.  This scheme, which was introduced in response to the unprecedented impact of the COVID-19 pandemic, includes residential tenants who are in arrears of rent.

What is a breathing space?

There are two types of breathing space:-

Hong Kong and the Mainland have agreed a new co-operation mechanism for cross-border insolvency. Under the agreement, liquidators from Hong Kong may apply to Mainland courts for recognition of insolvency proceedings in Hong Kong, whilst bankruptcy administrators from the Mainland can apply to the Hong Kong High Court for recognition of bankruptcy proceedings in the Mainland.

Hong Kong and the Mainland have agreed a new co-operation mechanism for cross-border insolvency.

An important judgment by Snowden J yesterday, sanctioning Virgin Active's restructuring plans after a contested sanction hearing, which included a cram down of several landlord classes that did not approve the plans by the requisite majorities in those classes.

The decision is important as among the many points covered, it considers certain key issues including:

An important judgment handed down by Zacaroli J yesterday in the New Look CVA challenge. The New Look CVA proposal involved treating landlords of different leases in various different ways, including (i) resetting rent to a turnover percentage (ii) keeping rent intact and (iii) reducing rent to nil. Landlords are given the flexibility to terminate leases within a prescribed period where they identify a tenant prepared to pay better rent (important to ensure the landlord's proprietary right is not interfered with). In a CVA, all unsecured creditors are invited to vote.

The UK's accession to the Lugano Convention has become somewhat politicised, with the EU stating that it is not minded to allow the UK to accede, as that will then set a precedent for other third party states.

This will impact certain UK restructuring tools.

Corporate Insolvency and Governance Act 2020 regulations come into force on 26 March 2021 extending the duration of COVID-19 related temporary measures, including:

Some interesting recent scheme and plan law of late, proving that schemes and plans continue to be popular restructuring tools for all types of companies and international groups.

DeepOcean companies (Part 26A plans) – January 2021

This was the first time that the court had to consider the application of the new ‘cross-class cram down’ procedure under Part 26A. Trower J approved the plans proposed by three DeepOcean companies but had reserved judgment and in late January handed down a written judgment with important guidance for future plans.

Another interesting case on schemes around the issue of insolvency. A judgment handed down yesterday by Snowden J in MAB Leasing Limited (a Malaysia Airlines leasing company) "parked" the issue of whether a Part 26 scheme (note, not a Part 26A plan) was an insolvency related event under the Cape Town Convention and Aircraft Protocol, as there was unanimous creditor consent. At the earlier convening hearing, Zacaroli J, without needing to decide the issue, stated that the company counsel's skeleton provided a "powerful case for concluding that the [Cape Town Convention] did not apply".