Re Provident SPV Ltd

The court ordered the convening of a single class meeting of the proposed scheme creditors under section 895 of the Companies Act 2006 to consider a scheme of arrangement promoted by Provident SPV Limited. The judge found that adequate notice had been given, that the court had jurisdiction to entertain the scheme and that the scheme was properly a compromise or arrangement. On class composition the court held that a single class of "redress creditors" was appropriate because the scheme offered the same commercial deal to all such creditors and there was a sufficient community of interest; potential differences (for example between borrowers and guarantors, current and former borrowers, and assigned loans) did not require fracturing the class though they might bear on fairness at the sanction hearing.

The court approved the proposed arrangements for ascertaining votes and claims (including an automated four-stage screening methodology and weighting of unliquidated claims) and accepted the proposed virtual meeting format. The court identified no legal or technical "road block" that would prevent sanction but drew attention to substantive fairness issues to be considered at sanction, notably the absence of a future shareholder contribution to the compensation fund and objections raised by the Financial Conduct Authority which the court said were matters for the sanction stage.

Background and parties: Provident Personal Credit Limited and Greenwood Personal Credit Limited (together "the Lenders") operated small, short-term loans. A substantial increase in customer redress claims led the Group to propose a scheme of arrangement funded by Provident SPV Limited, a special purpose vehicle incorporated to promote the scheme and enter a deed of contribution and indemnity.

Nature of the application: This was an application for an order convening a single meeting of redress creditors to consider the proposed scheme of arrangement. The scheme envisaged a fund of £50 million and c.£15 million for administration, a six-month claims bar date for loans entered into before 17 December 2020, automated screening and an independent adjudicator to resolve disputes, with a pro rata distribution thereafter.

Issues framed:

• whether adequate notice of the convening hearing had been given;
• whether the court had jurisdiction to entertain the scheme under section 895 Companies Act 2006 and whether the SPV structure was permissible;
• class composition — whether a single class of redress creditors was appropriate or whether it should be fractured;
• whether arrangements for ascertaining the wishes of scheme members (including electronic/virtual meeting and automated claim-weighting) were satisfactory;
• whether there was any legal or practical "road block" to sanction (including FCA objections and fairness issues such as absence of shareholder contribution).

Reasoning and decision: The court concluded that notice and circulation arrangements were adequate and that the Company qualified under section 895. The SPV and assumed-liability structure was acceptable in principle, relying on prior authorities. On class composition the court applied the community-of-interest test (Sovereign Life v Dodd) and recent authorities, holding that differences of circumstance (for example set-off rights of current borrowers or treatment of assigned loans) did not demonstrate an absence of community of interest sufficient to require multiple classes; treatment of assigned loans and set-off equivalence was a fairness matter for sanction rather than class division. The court found the explanatory materials, short supplementary communications and proposed virtual meeting timetable adequate, and the automated four-stage screening and weighting method sufficient for voting. The court acknowledged FCA objections and a skilled-person report under section 166 FISMA supporting the methodology, but left substantive FCA concerns and overall fairness (notably the lack of shareholder future contributions) to be addressed at the sanction hearing. The court therefore ordered convening of a single class meeting in the terms of the draft order.

Order made convening a single class meeting of redress creditors. The court held there was adequate notice, jurisdiction under section 895 Companies Act 2006, and that a single class was appropriate because creditors shared a community of interest; procedural arrangements for voting and a virtual meeting were satisfactory. The court identified no legal or technical road block to sanction but reserved substantive fairness issues (including FCA objections and the absence of a future shareholder contribution) for determination at the sanction hearing.