In the matter of the Great Annual Savings Company Limited

At the convening stage of a restructuring plan, the court must be satisfied that the company has taken all reasonable steps to identify and notify its creditors. The assessment is practical and depends on the nature of the business, its records and what is reasonably practicable.

A restructuring plan must satisfy the statutory conditions in Companies Act 2006 s 901A. A proposal involving the modification or extinction of creditors’ rights must contain sufficient give and take to constitute a compromise or arrangement. A modest compensating payment may suffice. Class composition depends on creditors’ existing rights, the realistic alternative and the rights offered under the plan. Creditors may be placed in separate classes where their rights or treatment differ materially.

The Company sought directions for meetings of creditors to consider a restructuring plan under Part 26A of the Companies Act 2006. At an earlier hearing, the court had raised concerns about notification and about whether contingent creditors receiving only nominal consideration were parties to a compromise or arrangement.

The Company revised its proposal. It abandoned its immediate application to exclude creditors with no genuine economic interest from meetings, proposed meetings for 15 classes, and established a fund from which contingent creditors could receive up to 2p in the pound. The court had to determine whether notice was adequate, whether the statutory threshold conditions were met, whether the proposed classes were properly constituted and whether the meetings should be convened.

1. Notice. The Company had taken all reasonable steps to identify and notify creditors. The inquiry was informed by the nature of its business, its record-keeping processes and what was reasonably practicable. The requirements of the practice statement were satisfied.
2. Statutory conditions. Condition A under Companies Act 2006 s 901A was met because the Company faced severe liquidity difficulties, could not pay its debts as they fell due and was likely to enter administration. Condition B was also met because the plan was intended to mitigate those difficulties by providing creditors with a better return than administration and allowing the business to continue.
3. Compromise or arrangement. The principle in Re NFU Development Trust Ltd [1972] 1 WLR 1548 requires an element of give and take. Total surrender or confiscation without compensating advantage is not a compromise or arrangement. The court did not need to decide whether s 901G could permit a plan giving dissenting creditors nothing where they would receive nothing in the relevant alternative. The revised plan provided a £14,000 fund for contingent creditors and therefore supplied sufficient compensating advantage at the jurisdictional stage. The ultimate appropriateness of that treatment remained for sanction.
4. Classes. Class composition concerned creditors’ rights, not their personal interests. The relevant comparison was between existing rights, assessed against the realistic alternative, and rights under the plan. Separate classes were justified for secured, secondary preferential, property-related, energy-supplier, other creditor and contingent misselling claims where their rights or treatment differed materially.
5. Other matters and order. The Company had commercial reasons for excluding certain creditors, but whether those exclusions were fair was reserved for sanction. The explanatory statement contained information reasonably necessary for creditors to vote, without preventing objections at sanction. The court approved the proposed meetings and sealing of the order.