Virgin Atlantic Airways Ltd, Re

At the convening stage for a restructuring plan under Part 26A of the Companies Act 2006, the court determines jurisdiction, statutory threshold conditions, class constitution and other non-merits matters. It does not determine the plan’s merits or fairness.

The established Part 26 approach to class constitution also applies under Part 26A. Creditors belong together where their legal rights are not so dissimilar that consultation with a view to their common interest is impossible. The court compares the rights to be compromised with the rights conferred by the plan, using formal insolvency as the comparator where that is the relevant alternative.

Virgin Atlantic Airways Ltd applied under section 901C(1) of the Companies Act 2006 for meetings of four creditor classes to consider a restructuring plan. The COVID-19 pandemic had caused an acute liquidity crisis. Without restructuring and new finance, administration was considered probable and unsecured creditors were expected to recover substantially less.

The court considered creditor notification, the statutory conditions under section 901A, class constitution, international jurisdiction, the explanatory statement, virtual meetings, recognition arrangements in the United States and confidentiality of court-file documents. The central question was whether meetings of the proposed classes should be summoned under the new Part 26A procedure.

1. Application granted. The court ordered meetings of the four proposed classes of plan creditors to be convened. The company was liable to be wound up under the Insolvency Act 1986 and was therefore a company to which Part 26A of the Companies Act 2006 applied.

2. The conditions in section 901A were satisfied. The company had encountered financial difficulties affecting its ability to continue as a going concern and was on the brink of collapse. The plan involved a compromise or arrangement and was intended to mitigate or eliminate those difficulties. “Compromise or arrangement” bears the same meaning under Parts 26 and 26A and entails some element of give and take.

3. At a convening hearing the court does not determine the merits or fairness of the proposal. Those matters arise at sanction if the statutory majority approves the plan. The trade creditors had received adequate notice, having regard to the communications made, the urgent and genuine timetable, the period available for consideration and the absence of complaints about insufficient time.

4. The established Part 26 class-composition principles apply under Part 26A. A class comprises creditors whose legal rights are not so dissimilar that consultation with a view to their common interest is impossible. The court examines the existing rights to be released or varied and the new rights conferred. Where the plan is an alternative to formal insolvency, the existing rights are assessed by reference to that insolvency. Commercial interests and immaterial contractual differences do not ordinarily require separate classes.

   On that basis, the revolving-credit lenders, operating lessors, connected-party creditors and trade creditors each formed a separate, properly constituted class. The connected parties could consult together despite a difference affecting Delta because every member had signed the support agreement.

5. Assuming without deciding that Chapter II and Article 4 of the Recast Judgments Regulation applied, Article 8 supplied jurisdiction because at least one creditor in every class, and 90 of 168 trade creditors, was domiciled in England. Article 25 did not furnish a safe alternative basis because not every trade creditor had agreed an English jurisdiction clause.

6. The explanatory statement was suitable, although its adequacy remained open at sanction. The meetings could be held virtually because the proposed arrangements gave creditors an adequate opportunity to consult. The court also granted the requested foreign-representative declaration and directed under CPR 5.4D(2) that the company receive notice of applications for court-file documents.

not stated in the judgment.