The Compendium

A Comprehensive Companion for All in the Insolvency and Restructuring Profession

Restoration aims to place the parties back into the position they would have been in had that transaction never taken place.

[See ‘Transaction at an Undervalue’ and ‘Preference’.]

Restructuring Plan

The Corporate Insolvency and Governance Act (CIGA) 2020 brought about many changes to the corporate insolvency regime and an important one was the UK Restructuring Plan. It is similar to the Scheme of Arrangement, but it has one important and different characteristic. The Restructuring Plan has the ability to ‘cross cram down’, which means it allows an IP to bind both secured and unsecured creditors who dissent.

The process to obtain a Restructuring Plan is as follows:

  • The company (or an Administrator, Liquidator, creditor, or a member) seeks a court Order convening creditor and/or members’ meetings to vote on the proposed Plan;
  • The applicant must provide all parties required to attend the meeting(s) with a statement setting out the key aspects of the proposed Plan;
  • Meetings are convened and creditors are split into classes to vote on the Plan;
  • Every creditor or member affected by the Plan must be allowed to participate in the meeting (unless the court is satis.ed that none of the members of the class has a genuine economic interest);
  • 75% or more by value of each class of creditor must vote in favour (subject to ‘cram down’);
  • The court has the power to sanction the Plan, even if a class of creditors vote against it (this is the ‘cross class cram down’ – see below); • The Plan will become effective upon delivery of the relevant sanction order to the Registrar of Companies and will bind the company and all creditors of each relevant class.

A ‘cross class cram down’ is possible in a Restructuring Plan under CIGA; it is not available under any alternative insolvency intervention.

Creditors are divided into ‘classes’ or types; for example, landlords, voting shareholders, etc. If one of the classes does not agree with the Plan the court can ignore their dissent, if it determines that a dissenting creditor is ‘no worse-off’