Restructuring plan as an alternative to administration

Court held that debtor company consent required before a Part 26A plan could be sanctioned by court.

This case concerned an application for a restructuring plan under Part 26A of the Companies Act 2006. The court ultimately sanctioned the restructuring plan which sanction included the use of the cross-class cram down power unique to Part 26A to cram down one dissenting class being the class made up of convertible loan note holders including the British Business Bank plc.

A peculiar feature of the case was that the company was already in administration and the application was brought by a shareholder and creditor of the company rather than by the company itself or the administrators. The administrators had indicated that, without a court order directing them to do so, they would not give consent on behalf of the Company for it to enter into the restructuring plan. A dispute arose between the claimant and the administrators as to whether company consent was required for a restructuring plan to take effect. The judge referred to the case of In re Savoy Hotel which had held in the context of a Part 26 scheme of arrangement that the court did not have jurisdiction to sanction a scheme of arrangement that did not have the approval of the company. The claimant submitted that the restructuring plan procedure under Part 26A was distinguishable on the ground that there was a cross-class cram down power in Part 26A that did not exist in Part 26.

The judge rejected this submission reasoning that the cross-class cram down power just provides a further mechanism to bind in a wider class of creditor and did not provide a mechanism for overriding the company's right to have the say in whether it will or will not join in and agree to a scheme or plan.

The judge nevertheless went on to hold that the court had the jurisdiction to direct the administrators acting on behalf of the company to give their consent to the scheme and the court held in the circumstances that it should so direct. Accordingly the scheme was sanctioned in consequence upon that court direction.

NGI Systems & Solutions Limited v The Good Box Co Labs Limited (in administration), Chancery Division, 14 February 2023

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