IN THE MATTER OF ALL SCHEME LTD

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements have been met, that the voting class was fairly represented, and that the statutory majority acted bona fide without coercing the minority. The court must also consider whether an honest, intelligent and reasonable member of the class could reasonably approve the scheme.

That assessment depends on a representative vote and on creditors being able to understand the scheme and the realistic alternatives, including the likely outcome if sanction is refused. A scheme need not be the only or best fair scheme. Conditional arrangements may be sanctioned where their operation is clear, self-executing and adequately explained, even though future outcomes are uncertain. A special purpose vehicle may assume liabilities for a scheme where there are sufficient commercial reasons and no material prejudice to other creditors.

ALL Scheme Limited applied under Part 26 of the Companies Act 2006 for sanction of two alternative schemes concerning redress claims arising from Amigo guarantor lending: the New Business Scheme and the Wind Down Scheme.

A predecessor scheme had been refused sanction by Miles J in [2021] EWHC 1401 (Ch). The present schemes were approved by the statutory majorities. The central issues were whether the statutory and procedural requirements had been satisfied, whether creditors had been properly informed of the alternatives, and whether the New Business Scheme was one which the court should sanction.

1. Sanction granted. The court sanctioned the New Business Scheme. Since that scheme was sanctioned, it was unnecessary to conduct a detailed comparison with the alternative Wind Down Scheme.
2. The statutory requirements were satisfied. The statutory majorities under section 899(1) of the Companies Act 2006 had been achieved. The meetings were properly convened and conducted, including by remote means. The single-class constitution had already been determined at the convening stage and there was no proper basis to revisit it.
3. The explanatory statement complied with section 897. It clearly explained the effect of the scheme, Amigo’s insolvency, the likely comparator, and the anticipated outcomes. The appropriate alternative to the schemes was a distributing administration, unlike the position when the predecessor scheme had been refused.
4. The majority was bona fide and representative. There was no evidence that creditors voted for collateral or special interests. The turnout was relatively high for a consumer scheme and did not indicate that the vote was unrepresentative.
5. The rationality test was satisfied. An honest, intelligent and reasonable Customer Creditor could reasonably approve the New Business Scheme. The result depended on creditors being able to appreciate the available alternatives. The explanatory material, customer advocate, creditor committee and related communications addressed the defects identified in the predecessor scheme.
6. The scheme’s structure did not constitute a blot. There were sufficient commercial reasons for SchemeCo, a special purpose vehicle, to assume liability and facilitate the restructuring. No material prejudice to bondholders had been shown.
7. Conditionality did not prevent sanction. The scheme’s effectiveness was unconditional. The alternative outcomes depended on future events, but those possibilities were clearly stated and the scheme was sufficiently certain and self-executing. The court did not require certainty that the New Business Conditions would be satisfied.
8. Existing shareholders’ objections had no legal relevance to the sanction decision. In the circumstances of insolvency and the administration comparator, Customer Creditors had priority over out-of-the-money shareholders. The proposed dilution and recapitalisation were inseparable from raising funds to implement the preferred solution.