“…is likely to be appropriate, or even necessary, where the creditors whose rights are affected by a plan or scheme are unable to represent themselves before the court-for example because there are many of them, with little financial sophistication and without the ability to co-ordinate their responses”
“The ordinary meaning of the word as a coming together of two or more persons is well established in the context of companies. It has been so established since 1876 at the latest, and the statutory provisions for schemes of arrangement, first enacted in 1870, have been re-enacted with the same requirement on numerous subsequent occasions. The case of the single member of the class which covers the position of the Growler meeting: Growler was in a class of one and attended the meeting by proxy. has been treated in the authorities as exceptional, resulting in what the legislature or other framers have the document in question must have intended to be an extended meaning to cover that case.”
“Part 26A is silent as to the approach the court should take when exercising its discretion to sanction a plan. The approach was left to be worked out on a case-by-case basis, building on the jurisprudence developed over the century and more of experience of schemes of arrangement, under what is now Part 26 of the 2006 Act.”
“(i) At the first stage, the court must consider whether the provisions of the statute have been complied with. This will include questions of class composition, whether the statutory majorities were obtained, and whether an adequate explanatory statement was distributed to creditors. (ii) At the second stage, the court must consider whether the class was fairly represented by the meeting, and whether the majority were coercing the minority in order to promote interest adverse to the class whom they purported to represent. (iii) At the third stage, the court must consider whether the scheme is a fair scheme which a creditor could reasonably approve. Importantly, it must be appreciated that the court is not concerned to decide whether the scheme is the only fair scheme or even the ‘best’ scheme. (iv) At the fourth stage, the court must consider whether there is any ‘blot’ or defect in the scheme that would come up for example, make it unlawful when any other way inoperable.”
“[132]…there Can be no assumption that the assenting classes that have voted in favour of a plan have any commonality of commercial interests with the dissenting class. Rather, the entire premise for the Part 26A process is the creditors will have been summoned to different class meetings precisely because the differences in their existing and proposed rights under the plan meant that they had insufficient commonality of commercial interests to consider the merits of the plan together… [133] Given that dissimilarity of interests, the mere fact that one or more classes of creditors may have acted in their own separate interests in voting in favour the plan says nothing about the commercial merits of the plan for a dissenting class or the fairness of imposing the plan upon them. Indeed, given that the very premise of Part 26A is that the company is facing financial difficulties and hence may not have sufficient assets to pay everyone in full, the assenting class(es) may have voted overwhelmingly in favour precisely because the plan requires them to accept less risk of loss, or a lower discount on their claims, than the dissenting class.”
“The “no worse off” test can be approached, first, by identifying what would be most likely to occur in relation to the Plan Companies if the Plans were not sanctioned; second, determining what would be the outcome or consequences of that for the members of the dissenting classes (primarily, but not exclusively in terms of their anticipated returns on their claims); and third, comparing that outcome and those consequences with the outcome and consequences for the members of the dissenting classes if the Plans are sanctioned”. (2) At [107], Snowden J expanded on the meaning of “most likely to occur”: “It is important to appreciate that under the first stage of this approach, the Court is not required to satisfy itself that a particular alternative would definitely occur. Nor is the Court required to conclude that it is more likely than not that a particular alternative outcome would occur. The critical words in the section are what is “most likely” to occur. Thus, if there were three possible alternatives, the court is required only to select the one that is more likely to occur than the other two.”
“The vertical comparison involves a comparison of the position of the particular class of creditors in question under the restructuring proposal with the position of that same class in the relevant alternative. The horizontal comparison compares the position of the class in question with the position of other creditors or classes of creditors (or members) if the restructuring goes ahead.”
“159. …. a key issue for the court in exercising its discretion to impose a plan upon a dissenting class is to identify whether the plan provides for differences in treatment of the different classes of creditors inter se and, if so, whether those differences can be justified. I also agree with Zacaroli J In Re Houst Ltd[2022] EWHC 1941 (Ch) at [29] to [31]. that an obvious reference point for this exercise must be the position of the creditors in the relevant alternative. 160. … In my judgment, that exercise of a judicial discretion to alter the rights of a dissenting class for the perceived benefit of the assenting classes necessarily requires the court to inquire how the value sought to be preserved or generated by the restructuring plan, over and above the relevant alternative, is to be allocated between those different creditor groups. 161. It is this concept that has been encapsulated in the expression ‘the fair distribution of the benefits of the restructuring’ or ‘fair distribution of the restructuring surplus’…”
“While it may well be right in some cases to conclude that the fact that a dissenting class would be out of the money in the relevant alternative is a sufficient justification to exclude them from whatever benefit the restructuring preserves or generates, that will not necessarily always be so. … there are myriad reasons why a company might be suffering financial difficulties, and why a plan may be proposed, and a variety of structures that it might adopt. The nature of the benefits preserved or generated by a plan and the extent to which a fair distribution of those benefits will require consideration to be given to those who would be out of the money in the relevant alternative are likely to vary accordingly.”
“…the proper use of the cross-class cram down power is to enable a plan to be sanctioned against the opposition of those unreasonably holding out for a better deal, where there has been a genuine attempt to formulate and negotiate a reasonable compromise between all stakeholders”
“(1) There must be a fair sharing of the burden of the restructuring plan amongst those whose rights are compromised and a fair allocation of its benefits (the value preserved or generated by the plan) to and between them. (2) The assenting classes will have made their own judgment upon that question, and the concern of the Court is to look at it from the perspective of the dissenting classes and to ask why the compromise approved by the assenting classes should be imposed upon them. (3) The burden lies upon the plan company to persuade the Court that there is a fair sharing of the burdens and of the benefits even if no objectors appear at the sanction hearing. (4) The starting point (but only the starting point) is the treatment of the dissenting class in the relevant alternative. (5) Where the relevant alternative is an insolvency process the initial expectation will be pari passu treatment of creditors within each insolvency class. (6) Differential treatment within an insolvency class is permissible if justified on proper grounds. (7) When considering whether the treatment of a class or any differential treatment within a class is “fair” the primary focus of the Court is upon their interests qua creditor. (8) When considering the sharing of the burdens and the benefits the Court is not confined to a consideration of the restructuring plan itself but is entitled to stand back and consider also the effect of the restructuring plan on those who are not parties to the compromises (such as creditors outside the scope of the plan or shareholders). (9) When considering the sharing of the burdens and the benefits the Court is entitled to take into account the source of the benefits (how the value is preserved or generated by the plan). (10) When assessing the burdens and benefits the court is concerned with the substance not the form: the provision of new money on terms more advantageous to the provider than would be required by a lender in the market is in reality a benefit conferred on the provider rather than a contribution to the cost of the plan. (11) The Court will have regard to the evolution of the restructuring plan and will seek to assess whether it is a genuine attempt to formulate a fair and reasonable solution to a critical problem or an attempt to impose arbitrary compromise terms upon creditors with a view to extracting advantage in a critical situation.”
“the continued supply of goods or services by those creditors is regarded as essential for the beneficial continuation of the company's business under the plan…”
“I think every group would like to see its allocation increased. If we increase noteholders, we reduce either Growler or shareholders. If we increase shareholders, we reduce noteholders or Growler, no one’s going to be happy.”
“Without purporting to define its limits for all circumstances, the concept of “blot” is and actually capable of covering a case where the scheme or plan contains a technical defect so that it is unworkable when capable of achieving what was intended. It is equally capable of covering a case where the scheme or plan requires the company to take, or contemplates it taking, a step which is illegal, ultra vires, or in breach of some other obligation owed by the company, even where the obligation is out to persons who are not members or creditors of the company.”
“….The court will scrutinise the evidence of foreign law relied upon but will not undertake its own researches. However, the court is not inhibited from using its own intelligence and common sense.”
“I am quite confident in expressing the opinion that courts in New York (bankruptcy and nonbankruptcy alike), if asked to give effect to and enforce the Sanction Order, would be likely to do so without any hesitation whatsoever. It is standard practice and only natural for courts in the United States to defer to the procedurally fair determinations of English courts, and I see the current Restructuring Plan as fitting squarely within that unbroken tradition of deference”
“It must also be reiterated 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...”