All Scheme Limited, Re

Obtaining the statutory majority does not entitle a company to sanction as of right. Under the Companies Act 2006, Part 26, the court retains an unfettered discretion and must ensure that creditors received fair, full and accurate information. That information must explain realistic alternatives and their consequences. Where financially unsophisticated consumers are asked to accept a substantial compromise while shareholders retain a material stake, the explanatory statement should explain the allocation of losses and benefits and the assumptions supporting it. If those safeguards are not met, the court should not rely on the vote or apply the usual rationality deference.

ALL Scheme Limited sought sanction under section 899 of the Companies Act 2006 for a scheme compromising consumer redress claims and claims by the Financial Ombudsman Service. The scheme was approved by 95.1% of creditors by number and 95.7% by value of those voting. The Financial Conduct Authority opposed sanction, arguing that the explanatory statement presented an unfairly binary choice, failed to explain realistic restructuring alternatives, and did not explain why shareholders retained their equity while creditors suffered a substantial reduction. The central issue was whether the creditors had been properly informed and consulted so that the court could rely on their vote.

The sanction application was refused. The statutory majorities had been obtained, but section 899(1) conferred a discretion rather than an entitlement to sanction.

1. The court applied the four-stage checklist identified in Re Noble Group Ltd [2018] EWHC 3092 (Ch). The meeting was properly convened, the statutory voting thresholds were met, and no blot was established. Procedural defects were immaterial and could be waived, consistently with Re Rhythmone plc [2019] EWHC 967 (Ch). The virtual meeting was also conducted consistently with the guidance in Re Castle Trust Direct plc [2020] EWHC 969.
2. Drawing on Re Sunbird Business Services Limited [2020] EWHC 2493, Re Telewest Communications plc (No.2) [2005] 1 BCLC 772 and Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385, the court held that the scheme jurisdiction was coercive and that creditors had to be properly consulted. They required information sufficient to form a reasonable judgment, including a fair explanation of the scheme’s commercial impact and realistic alternatives.
3. The usual rationality approach, under which the court defers to an informed creditor vote and asks whether an intelligent and honest creditor might reasonably approve the scheme, applied only after proper consultation. The absence of independent advice, negotiation, a steering group and the low turnout were not individually fatal, but they reduced the weight that could properly be given to the vote.
4. The creditors were financially vulnerable consumers with limited financial literacy and no professional advice. The explanatory statement presented the choice as this scheme or immediate insolvency. It did not fairly explain that a further restructuring might be possible, nor did it explain why shareholders should retain their equity while creditors accepted a 90% reduction, or why the future business contribution was limited to 15% of profits for four years.
5. The evidence did not establish an imminent liquidity crisis. The existing moratorium on redress payments could continue, and the directors would probably explore a further restructuring. The court therefore could not treat immediate administration as the inevitable alternative. Since the creditors had not been fully and fairly informed, the court could not rely on their affirmative vote or sanction the Scheme.

The judgment records a convening hearing on 30 March 2021, at which Sir Alastair Norris directed a single meeting of the Scheme Creditors. The present first-instance judgment concerns the subsequent sanction hearing. No appeal or lower-court judgment is stated.