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.
The new law emphasises preventive restructuring, cross-border cooperation and equitable treatment of creditors
The European Union has recognised the need for harmonised insolvency laws across its member states and has taken a significant step forward with the introduction of the new EU Restructuring Directive ((EU) 2019/1023).
This directive aims to establish a common framework for insolvency proceedings, thereby enhancing cross-border cooperation and safeguarding the interests of all stakeholders involved.
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".
Introduction
Preventive measures
Out-of-court reorganisation
In-court reorganisation
Modernisation of bankruptcy
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.
On 15 November 2023, the Temporary Transparency of Expedited Liquidation Act enters into force, initially for a period of two years. Expedited liquidation (also known as 'turboliquidation') concerns the dissolution of a legal entity with no assets, at its own initiative. The temporary Act aims to increase transparency in the case of an expedited liquidation and to improve the protection of creditors.
The Belgian legislator is preparing a legal framework on insolvency law to expand the restructuring toolbox. On 26 March 2023, a draft bill was published transposing EU Directive 2019/1023 on restructuring and insolvency. The Bill should be voted before the summer holidays. Our Restructuring & Insolvency team has identified five things you need to know about the upcoming changes.