UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
nies as schemes of arrangement, a company seeking to enter into a restructuring plan process must show that: • it has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern; and • a compromise or arrangement has been pro - posed between the company and its creditors (or any class of them) for the purpose of elimi - nating, reducing or preventing, or mitigating the effect of, any of those financial difficulties. A restructuring plan may be proposed by the debtor company, any creditor of the company or any liquidator or administrator appointed to the company. Affected creditors will vote on the pro - posed compromise or arrangement in respect of their claims in a single class or in a number of classes depending on the rights of such credi - tors which will be affected by the proposed restructuring plan and any new rights that such creditors are given under the restructuring plan. A restructuring plan will be deemed to be approved if at least 75% in value of the credi - tors and/or members (if applicable) present and voting at the meeting of at least one class of creditors vote in favour of the proposed compro - mise. There is no requirement for the approving creditors to constitute a majority in number of those creditors present and voting, and there is crucially no requirement for each and every vot - ing class to approve of the plan, provided that the court is satisfied that: • none of the members of a dissenting class would be any worse off if the restructuring plan were to be sanctioned than they would be in the event of the “relevant alternative”; and
• the restructuring plan was approved by at least one class of creditors who would receive a payment or have a genuine eco - nomic interest in the company in the event of the “relevant alternative”. The “relevant alternative” for the purposes of this assessment is whatever the court consid - ers would be most likely to occur in relation to the company if the restructuring plan were not sanctioned. By virtue of these mechanisms, the restructuring plan process provides for the pos - sibility of a “cross-class cram-down”, meaning the courts may sanction a restructuring plan even if one or more classes of affected credi - tors do not vote in favour of the restructuring plan, effectively allowing the vote of one class of stakeholders to bind other classes. Following approval of the restructuring plan at the creditor meeting(s), the restructuring plan needs to be sanctioned by the court at a sanc - tion hearing where the court will review whether the applicable statutory conditions have been met and may also consider whether the restruc - turing plan is just and equitable. The court has discretion as to whether to sanction the restruc - turing plan as approved, make an order condi - tional upon modifications being made or refuse to sanction the restructuring plan. Once sanctioned, the restructuring plan binds all affected stakeholders whose rights will be as set out in the restructuring plan, which will be effective (in line with its terms) upon delivery of the court’s order sanctioning the restructuring plan to the Registrar of Companies or, where the company is an overseas company, publication of the court’s order in the Gazette. As with a scheme of arrangement, the commencement of a restructuring plan process does not automati -
313 CHAMBERS.COM
Powered by FlippingBook