Overview

On 12 May 2021, the High Court sanctioned three inter-conditional restructuring plans, under the Part 26A of the Companies Act 2006, for certain English subsidiaries of the Virgin Active group, despite major opposition of certain landlords.[1] In the landmark decision, the High Court exercised its discretion to cram-down multiple classes of dissenting landlords in each plan, compromising their claims.

The legal challenge (Carraway Guildford (Nominee A) Limited and Others v Regis UK Limited and Others, No. 8276 of 2018) by landlords against a retail company voluntary arrangement (CVA) was accepted by Mr Justice Zacaroli.

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:-

Summary

The much anticipated judgement of Mr Justice Snowden in relation to a restructuring plan proposal (the “Plans”) made by Virgin Active Holdings Limited, Virgin Active Limited and Virgin Active Health Clubs Limited (the “Plan Companies”) was handed down on 12 May 2021.

The pandemic and various lockdowns have been tough on the landlord community. The last few days have not made that any easier. First, the New Look decision dismissed the challenge mounted by a number of landlords (see our blog here ). Then on 12 May 2021 the landlord community was dealt another blow by the outcome of the restructuring plan (“RP”) in Virgin Active.

The much anticipated judgement of Mr Justice Snowden in relation to a restructuring plan proposal (the “Plans”) made by Virgin Active Holdings Limited, Virgin Active Limited and Virgin Active Health Clubs Limited (the “Plan Companies”) was handed down on 12 May 2021.

Landlords of New Look stores have failed in their challenge to a CVA which wrote off rent arrears and imposed turnover rents on hundreds of stores.

Like so many high street fashion retailers New Look was already in a precarious position before the pandemic hit. When its turnover was reduced to nil overnight it projected it would run out of cash without help.

There has been much debate in recent years around the use made of certain UK restructuring tools – the company voluntary arrangement and, more recently, the new restructuring plan – to restructure commercial property leases. Commercial tenants argue that compromise is necessary to address high fixed costs that are no longer sustainable, but landlords have often been critical of the approach taken. This debate has become more acute in the context of the pandemic, as many High Street businesses subject to mandatory closure have built up significant rent arrears that need to be addressed.

The Part 26A Restructuring Plans (the "Plans") proposed by each of Virgin Active Holdings, Virgin Active Limited and Virgin Active Health Clubs Limited (the "Plan Companies") have been sanctioned by the court. This decision has been eagerly anticipated by the restructuring and insolvency market, struggling tenants and the beleaguered landlord community.

In the hotly anticipated judgment of Mr Justice Zacaroli in the case of Lazari Properties 2 Limited and Ors and New Look Retailers Limited ("New Look") [2021] EWHC 1209 (Ch) New Look has successfully defended a challenge to its CVA on the grounds of jurisdiction, material irregularity and unfair prejudice. The judgment confirms once again that differential treatment of creditors does not on its own establish unfair prejudice but that it will be a matter for determination based on all the circumstances of the case.