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Differences between restructuring plans, schemes of arrangement, and CVAs

Differences between restructuring plans, schemes of arrangement, and CVAs Part 26A restructuring plans The Corporate Insolvency and Governance Act 2020 (CIGA 2020) introduced a new restructuring tool, namely a Part 26A restructuring plan. Consultation responses and discussions with stakeholders persuaded the government of the benefits of modelling the restructuring plan procedure on that of schemes of arrangements. As well as familiarity, this had the advantage of providing a long-established and tested body of jurisprudence that courts are able to draw upon when dealing with certain aspects of restructuring plans and considering matters such as class formation (ie relevant scheme case law is applicable to certain provisions of the new restructuring plan procedure, see: Schemes of arrangement—overview). CIGA 2020 introduced a restructuring procedure that allows a company to bind all creditors or members, including junior (or senior) classes of creditors even if they vote against the plan, through the use of a cross-class cram down (CCCD) provision if certain conditions are satisfied (see Practice Note: Cross-Class Cram Down under a Part...

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Schemes of arrangement—voting and cram-down

Schemes of arrangement—voting and cram-down The voting requirement As set out in Practice Note: Schemes of arrangement—process and statutory framework, section 899(1) of the Companies Act 2006 (CA 2006) provides that a scheme of arrangement can be sanctioned by the court only if it is approved by a majority in number representing 75% in value of the creditors voting in person or by proxy at each of the scheme meetings. From 26 June 2020, for any scheme that is proposed within 12 weeks of a moratorium under the Corporate Insolvency and Governance Act 2020 (CIGA 2020), the holders of any moratorium debts and pre-moratorium debts for which the company did not have a payment holiday during the moratorium have, in effect, a veto right in respect of the scheme as the court may not sanction the scheme if it includes provision in respect of such creditors without their consent (see Practice Note: Moratorium). For information on the methodology to be applied to determine the correct composition of...

Part 26A restructuring plans—process

Part 26A restructuring plans—process Key steps and timetables The restructuring plan (RP) process largely mirrors that used in schemes: For cases where Cross Class Cram-Down (CCCD) or valuation issues are likely to be contested, or where valuation experts need to be cross-examined, it is prudent to notify the court at the convening hearing stage and to allow sufficient time to be factored into the court time table to allow proper consideration of the matters by both the parties affected and the court. Snowden LJ in the Court of Appeal in Re AGPS BondCo plc; sub nom Strategic Value Capital Solutions Master Fund LP v AGPS BondCo plc (referred to here as Adler) cautioned that the court’s willingness to decide cases quickly to assist companies in genuine and urgent financial difficulties must not be taken for granted or abused. In particular, where a restructuring is designed to deal with the foreseeable maturity of financial instruments, and a division of the anticipated benefits of the restructuring is being negotiated...

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Part 26A Restructuring plans—administration is not a guarantee of compliance and composite rights require different classes (Re Amicus Finance plc)

Restructuring & Insolvency analysis: The court found that administration was not a complete answer to the requirement of condition A for restructuring plans proposed under Part 26A of the Companies Act 2006 (CA 2006). It was also necessary to show that condition A was satisfied on the evidence available. Separate classes were also required for the senior and junior secured debt. Written by Andrew Mace of 9 Stone Buildings who acted for Crowdstacker Corporate Services Ltd (Crowdstacker).

Banking and Finance weekly highlights—1 July 2021

This week's edition of Banking and Finance weekly highlights includes: (1) The FCA publishes a consultation paper on its proposed decision to require a change of a benchmark’s methodology, (2) HMLR publishes guidance on which signatures are acceptable in which documents and (3) ISDA issues guidance on the key changes made in the 2021 ISDA Interest Rate Derivatives Definitions.