Re GAS Co. Limited

The court considered an application for directions to convene creditor meetings in respect of a proposed restructuring plan under the Companies Act 2006 (notably the provisions in Part 26A including sections 901A, 901C and 901G). The key issues were adequacy of notice to plan creditors, satisfaction of the jurisdictional threshold conditions (Conditions A and B in section 901A), class composition and the treatment of contingent creditors. The court was satisfied that the company had taken all reasonable steps to identify and notify creditors, that Condition A (financial difficulties affecting going concern) and Condition B (a plan proposed to mitigate those difficulties) were met, and that the revised treatment of contingent creditors (a funded pool providing a modest dividend) provided sufficient "give and take" for the proposal to qualify as a compromise or arrangement. The court directed that 15 separate class meetings be convened and approved the form of order and the proposed arrangements for notice and meeting dates.

Background and nature of the application.

The company, Great Annual Savings Co Ltd, applied for directions to convene meetings of creditors in order to present and seek sanction of a restructuring plan under the Companies Act 2006. The relief to be sought ultimately is the sanction of a plan under the Part 26A restructuring plan regime (the court was asked to give directions to convene class meetings pursuant to section 901C).

Parties and procedural posture.

• The applicant was the company in financial difficulty. The principal creditor categories included a secured lender, HM Revenue & Customs, various energy suppliers with clawback claims, landlords and other unsecured creditors, and a wide class of contingent creditors (customers with misselling or similar claims).
• This was the second hearing: the first hearing was adjourned because the judge was not then satisfied as to adequacy of notification and there were potential jurisdictional questions about treatment of contingent creditors.

Issues framed by the court.

1. Whether the company had taken all reasonable steps to identify and notify plan creditors for the purposes of convening meetings.
2. Whether the jurisdictional threshold conditions in section 901A (Conditions A and B) were satisfied.
3. Whether the proposed class composition was appropriate for convening separate meetings.
4. Whether the proposed treatment of contingent creditors involved a sufficient element of give and take to constitute a "compromise or arrangement" for jurisdictional purposes.
5. Whether the explanatory statement and practical arrangements for meetings were adequate.

Court’s reasoning and conclusions.

• On notice: after additional evidence explaining internal record‑keeping and repeated communications to creditors, the court concluded the company had taken all reasonable steps to identify and notify creditors and that the practice statement requirements for notification for the convening hearing were satisfied.
• On Condition A the court was satisfied the company is facing financial difficulties affecting its ability to trade as a going concern (insufficient liquidity, winding up petition by HMRC, secured lender unwilling to advance further).
• On Condition B the court accepted the plan’s purpose was to mitigate the financial difficulties and to provide a better return than administration; whether it did so fairly was reserved for the sanction stage.
• On contingent creditors the earlier concern (based on NFU) that nominal payments might amount to expropriation was addressed by the company’s revised proposal: a funded pool (c.£14,000) to provide a small dividend, which the court considered analogous to treatment in Smile Telecom and sufficient to establish give and take for jurisdictional purposes.
• On class composition the court approved separate meetings for 15 classes because differences in existing rights and proposed treatment made consultation on a common interest impossible in certain cases; other unsecured creditors were split into distinct classes where their proposed treatment differed materially.
• The explanatory statement and the proposed arrangements for delivering notices and holding meetings were held to be adequate for the convening stage.

The court therefore directed convening of the proposed class meetings and approved the form of order and meeting arrangements; substantive fairness and sanction remain matters for the subsequent sanction hearing.

This was a first instance application to convene creditor meetings in respect of a proposed restructuring plan. The court granted the application: it directed that 15 class meetings be convened, approved the notice and meeting arrangements and the form of order, and held that the threshold conditions in section 901A were satisfied and that the revised treatment of contingent creditors provided sufficient give and take such that the court’s jurisdiction to consider the compromise or arrangement existed. The court reserved substantive assessment of fairness and sanction for the sanction hearing.