The Restructuring Plan And Dissenting Classes – Cross-Class Cram Down

Following the introduction of The Corporate Insolvency and Governance Act 2020 ("the Act"), we are starting to see use of the Restructuring Plan under 26A of the Companies Act 2006 in action.

The Restructuring Plan

Where a company is facing or is likely to experience financial difficulties affecting its ability to trade as a going concern, it can propose a Restructuring Plan ("the Plan") to creditors with a view to reaching a compromise or arrangement to eliminate, reduce or prevent, or mitigate the effect of, any of the financial difficulties.  If the Plan does not pass with the requisite majority as one class has voted against it, the company can ask the court to sanction it under Part 26A.  This process provides for a cross-class cram down, which means that all creditors of any class will be bound by the court sanction.  The court has discretion to sanction a Plan where it determines that it is more favourable to creditors than an alternative insolvency