Re Everyday Lending Limited

On an application to sanction a scheme of arrangement, the court applies a four-stage analysis: statutory compliance; fair representation and bona fide voting for proper purposes; whether an intelligent and honest member of the class might reasonably approve the scheme; and whether any blot or defect prevents the court from acting effectively.

A low turnout does not, by itself, make a vote unrepresentative or justify refusal of sanction. The court should assess the absolute turnout, its proportion of the class, the adequacy of notification and any explanation for limited participation. Where the vote is representative, creditors are properly informed, and the scheme offers a materially better return than the realistic insolvency alternative, the rationality requirement is satisfied.

Everyday Lending Limited applied for sanction of a scheme under Part 26 of the Companies Act 2006. The scheme proposed a £14 million fund to provide redress to borrowers and guarantors of consumer credit loans. Without the scheme, an administration was expected to produce an approximately 0.2 per cent return, whereas the scheme was estimated to produce a 24–31 per cent recovery.

At the convened meeting, 16,252 creditors voted, with 99.3 per cent by number and 99.4 per cent by value voting in favour. The court considered compliance with the convening order, the low turnout, the representativeness of the vote, the rationality of the compromise and the conditional restructuring arrangements required to fund the scheme.

1. Scheme sanctioned. The court was satisfied that the statutory majorities had been obtained and that the convening order had been complied with. Creditors had been able to participate, ask questions and vote, and no technical impediment had affected the meeting.
2. The single class meeting was properly constituted. No new issue had arisen after the convening hearing to undermine the class composition directed by Miles J.
3. The vote was fairly representative and the majority acted bona fide and for proper purposes. The turnout, approximately 4.7 per cent of the potential creditor population, did not justify withholding sanction. Turnout is fact-sensitive. Relevant considerations include the absolute number attending, the proportion of the class represented, the notification and advertising arrangements, explanations for limited participation, and the strength of the vote. The substantial number attending, extensive communications and overwhelming majority supported representativeness.
4. The rationality requirement was met. The court should be slow to differ from creditors who have been properly convened, consulted and informed, because they are generally better judges of their commercial interests. The scheme had been informed by the customer committee and the FCA, and offered a materially better return than the realistic administration comparator. An intelligent and honest member of the class could therefore reasonably approve it.
5. There was no blot or defect. Although the scheme depended on completion of the wider restructuring and payment of the Scheme Fund, the conditions were clearly explained. The secured lenders had committed to support the fallback Plan B, and there was sufficient certainty that the funding condition would be met. The court sanctioned the Scheme in the terms of the draft order.