CVA modifications permissible despite voting

The court dismissed a challenge to Caffè Nero’s company voluntary arrangement. The challenge was brought primarily on the basis of material irregularity in the CVA’s approval process.

An offer was made to purchase the Caffè Nero group. The offer was made on the day before the approval of Caffè Nero’s CVA was deemed to take effect. The offeror requested that CVA voting be postponed whilst the offer was considered. The shareholders of the Caffè Nero group rejected the offer and the CVA nominees refused to postpone the CVA voting procedure. On the day that the CVA voting procedure was deemed to take effect, the nominees announced the offer to the CVA creditors and confirmed that it had been rejected by the shareholders and the CVA decision procedure would not be postponed. The nominees also informed creditors of a modification to the CVA proposal (though the majority of creditors had already voted and could not amend their vote due to the electronic decision procedure being used).

The court held that there was no material irregularity. It determined the nominees’ announcement needn’t contain full details of the offer. Further, the modification was permissible despite voting having commenced. Those creditors who had already voted, but objected to the modification, could challenge the CVA on the basis of unfair prejudice or material irregularity following the CVA’s approval. The only way the nominees could have postponed the electronic decision procedure was by applying to the court (though it would have still been novel and risky). The refusal to postpone was reasonable given the offer’s last-minute timing. 

Nero Holdings Limited v Young [2021] EWHC 2600 (Ch)

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