“(1) If a number representing 75% in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting summoned under section 901C, agree a compromise or arrangement, the court may, on an application under this section, sanction the compromise or arrangement. (2) Subsection (1) is subject to … section 901G …”
“(1) This section applies if the compromise or arrangement is not agreed by a number representing at least 75% in value of a class of creditors or (as the case may be) of members of the company (“the dissenting class”), present and voting either in person or by proxy at the meeting summoned under section 901C. (2) If conditions A and B are met, the fact that the dissenting class has not agreed the compromise or arrangement does not prevent the court from sanctioning it under section 901F. (3) Condition A is that the court is satisfied that, if the compromise or arrangement were to be sanctioned under section 901F, none of the members of the dissenting class would be any worse off than they would be in the event of the relevant alternative (see subsection (4)). (4) For the purposes of this section “the relevant alternative” is whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned under section 901F. (5) Condition B is that the compromise or arrangement has been agreed by a number representing 75% in value of a class of creditors or (as the case may be) of members, present and voting either in person or by proxy at the meeting summoned under section 901C, who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative.”
“(4) For the purposes of this section “the relevant alternative” is whatever the court considers would be most likely to occur in relation to the company if the compromise or arrangement were not sanctioned under section 901F”
“(i) Have the classes been properly constituted; (ii) was there compliance with the terms of the convening order (including in particular whether the scheme creditors received an adequate explanatory statement); and (iii) were the statutory majorities obtained?”
“100. Where there is no cross-class cram down, the principles established in the context of schemes of arrangement remain applicable ([115] to [117]). Those were summarised by Snowden J in Re Noble Group (No.2) Ltd[2019] 2 BCLC 548 at [17] as follows: “(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 and 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 interests 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, for example, make it unlawful or in any other way inoperable.”
“…As David Richards J explained in Telewest at [21], under Part 26 the question of whether it is “fair” to impose a scheme upon the dissenting minority within a class is answered by applying a limited rationality test to the majority vote within that class. The court does not impose its own view of the commercial merits of the scheme, but asks as more limited question in relation to each class of whether the compromise or arrangement embodied in the scheme is one that “an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve. Almost invariably, under Part 26 this question is answered by the very fact of the vote in favour at each class meeting. The confidence that the court reposes in the decision of each class meeting in such circumstances is reinforced by the fact that the decision in favour of the scheme is the decision of an enhanced majority of 75% in value, rather than a simply majority, of those who voted at the class meeting. Moreover, the greater the majority in favour at the class meeting, the greater the confidence that the court can have that the scheme is in the interests of the class in question”
“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 whether the outcome and consequences for the members of the dissenting classes if the Plans are sanctioned”
"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 that an obvious reference point for this exercise must be the position of the creditors in the relevant alternative. 160. …As a matter of principle, when the court exercises its discretion to impose a plan upon a dissenting class, it subjects that class to an enforced compromise or arrangement of their rights in order to achieve a result that the assenting class of creditors consider to be to their commercial advantage. In my judgment, that exercise of 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'…"
“167. In my judgment, it is neither possible nor advisable to attempt to prescribe an exhaustive list of the criteria that might qualify. However, to give one obvious example, it is likely to be justifiable that creditors who provide some additional benefit or accommodation to assist the achievement of the purposes of the restructuring in the interests of creditors as a whole, should be entitled to receive some priority or a proportionately enhanced share of the benefits. That would give effect to the legislative intention that Part 26A plans should be a practical and effective restructuring tool. It was also the point made by Zacaroli J in Houst at para 31, referring to what Trower J had said in DeepOcean at para 64. 168. So, for example, it has been considered justifiable that creditors who provide new money to facilitate a restructuring should be entitled to receive full repayment of that new money under a plan in priority to the pre-existing creditors. The new money avoids an immediate cashflow insolvency and provides a breathing space for the debtor company to carry out the restructuring in the interests of creditors generally.”
“We have dealt with the provision of new money as a matter of principle above. As we have said, we accept that those providing new money to facilitate a restructuring can properly expect to be repaid that money in priority to the existing indebtedness of the company. That also clearly applies to the return on the new money, insofar as that return reflects the price for new money that would be obtainable in a competitive market. But whether, and if so, to what extent, the providers of new money should also be entitled to share – above and beyond market rates for such funding – in the benefits generated by the restructuring is dependent on the facts of each case...”
“(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.”
“There is, in my judgment, a considerable difference between waiver of liabilities already contracted for and which would be worthless in a formal insolvency, and new monies which will, if the Plans are sanctioned, be made available to finance future operations”
“... the Plan benefits are shared in the following proportions: 85.6% to the Secured Plan Creditors and 14.4% to the Unsecured Creditors. This means that the Unsecured Plan Creditors will receive considerably more than their pro rata share of the benefit of the restructuring when measured against the nominal values of the parties' contributions. If the benefit of the restructuring had been shared by reference to the nominal value of the parties' contributions in the forms of claim written off or new money advanced, then the Secured Plan Creditors would have received a 95.9% share of the benefit and the Unsecured Plan Creditors would have received a share of only 4.1%. In addition, the nominal values do not reflect the fact that the Secured Plan Creditors' claims rank in priority to the Unsecured Plan Creditors' claims and that new money is a far more important contribution than the writing off an existing unsecured debt which may, in the circumstances, be entirely under water.”
“(1) [it was] said that it was obvious that any claims against Maddox which it is unable to pay must be compromised to ensure that the Group is not at risk of an uncompromised claim against an insolvent parent which (at lowest) could result in enforcement action being taken against Maddox. Of itself, he said this is a sufficient commercial reason for the guarantee to be compromised. … (3) any such demand or enforcement action against Maddox could also undermine the basis on which the Group is intended to operate post- restructuring as well as posing a risk to the Company's ability to continue as a going concern. That is because: (i) as the sole shareholder in the Company, Maddox is integral to the corporate structure of the Group post-restructuring being the entity in which the shareholders hold their shareholdings in the Group and the sole shareholder of the Company; and (ii) critically, if Maddox were to enter administration then it is likely that an office holder would seek to try and realise any value in its principal asset, namely its shareholding in the Company, which would at the lowest seriously destabilise the Group. (4) in the light of the proximity of the connection between the Company and its parent, which is commercially dependent on the Company to generate revenue would simply not be commercially justifiable nor make any commercial sense to allow two Plan Creditors to retain their uncompromised guarantee claims against the insolvent parent (and might otherwise give rise to complaint by other Plan Creditors that they would be receiving favourable treatment under the Plan which is not justified by the financial position of Maddox).”
“(a) In practice, this requirement that the Court will need to be satisfied that the Plans will have “substantial effect” and will achieve their purpose Re Magyar Telecom BV [2014] B.C.C. 448 at [16], per David Richards J. (b) Where a restructuring plan involves the compromise of rights governed by foreign law, Court will therefore need to consider whether the effectiveness of the Plans in the relevant foreign jurisdictions in which the company has liabilities or assets: Sompo Japan Insurance Inc v Transfercom Ltd[2007] EWHC 146 (Ch) at [18]-26]. (c) The English court does not need certainty as to the position under foreign law, but it does require some credible evidence that it will not be acting in vain: Van Gansewinkel Groep BV[2015] Bus.L.R. 1046 at [71]. Such credible evidence must show that the Plans “at least will have a real prospect, of having substantial effect”: Codere Finance 2 (UK) ltd[2020] EWHC 2683 at [34]. (d) Further, the Court will only be acting in vain if it can be shown that the exercise of the jurisdiction to sanction the Plans would serve no discernible purpose at all: Sompo Japan at [20].”