First restructuring plan approved

The Corporate Insolvency and Governance Act 2020 introduced a new form of insolvency procedure known as a restructuring plan, a scheme of arrangement which brings with it the potential to bind dissenting classes of creditors. We now have the first reported example of a plan having being sanctioned for a restructure of Virgin Atlantic Airways Limited, albeit one where there was no need for any class to be crammed down.

The procedure involves two hearings, the first to summon the meetings needed and the second, if appropriate, to sanction the scheme.

At the first hearing, the Court does not consider the merits of the plan, but issues such as:

  • Jurisdiction.
  • The number of meetings required and their composition.
  • Issues which might later lead to a scheme being refused.

Two particular points for consideration were whether 168 trade creditors owed a combination of £54,000,000 under different arrangements were given adequate notice of the plan and if they should be placed in the same class. Unlike other creditor classes, they had not been consulted directly, but had been notified of the plan by letter and a webinar, the recording of which remained available. This was sufficient. 

The Court also confirmed it would take the same approach it already does with a Scheme of Arrangement. The long established principle is that a class should be confined to persons whose rights are not so dissimilar to make it impossible for them to consult with each other. It was appropriate to place them all in the same class given they would all be unsecured in a subsequent insolvency process and there was evidence all of them would in fact be better off than they would be in an administration, the most likely alternative.

The meetings were ordered to be convened and subsequently each creditor class did then vote overwhelmingly in favour. At a second hearing on 2 September 2020, the plan was subsequently sanctioned by the Court.

In the Matter of Virgin Atlantic Airlines Limited [2020] EWHC 2191 (Ch)

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