NGI Systems & Solutions Limited v The Good Box Co Labs Limited

Under Part 26A of the Companies Act 2006, a restructuring plan requires the company’s consent to join the arrangement. Cross-class cram-down binds dissenting creditor or member classes, but does not remove that separate requirement. The court may direct an administrator to give the company’s consent where the company’s interests have been adequately considered and no distinct interest justifies refusal. Once the statutory conditions are met, sanction remains discretionary. The court must assess the reliability of the meetings, the adequacy of the explanatory statement, the rationality and fairness of the plan, the relevant alternative, and the distribution of benefits between classes.

The company was in administration and its shareholder, supplier and creditor proposed a restructuring plan under Part 26A of the Companies Act 2006. The plan obtained the required majorities in every class except the Convertible Loan Holders. It provided for payment in full of certain creditor classes, equity for other stakeholders and cross-class cram-down of the dissenting class.

The administrators did not consent to the company entering the plan and sought directions concerning an alternative sale of the business and assets. The central issues were whether company consent was required, whether the meetings and statutory conditions were valid, whether the cross-class cram-down conditions were met, whether the plan should be sanctioned, and whether the administrators should be directed to provide consent.

1. Company consent. The language of Part 26A retains the requirement that the company consent to join the restructuring plan. The reasoning in Re Savoy Hotel Limited applied: cross-class cram-down binds dissentient classes of creditors or members, but does not override the company’s separate right to decide whether to enter the arrangement.
2. Meetings and statutory requirements. The classes were properly constituted. The meetings were fairly representative and, despite procedural imperfections concerning timing and service, creditors and members were adequately notified and able to participate. The explanatory statement fairly and accurately described the plan, its principal risks and the limitations of the available information. Its adequacy depended on the commercial context, urgency and information reasonably available.
3. Rationality and discretion. The plan was one which an intelligent and honest class member could reasonably support from the standpoint of ordinary class interests. The relevant alternative was an administration sale followed by liquidation, with little prospect of recovery for the dissenting Convertible Loan Holders. The plan offered them an equity stake with a better prospective outcome. Satisfaction of the cross-class cram-down conditions gave the plan a fair wind, but did not remove the court’s continuing discretion. The plan was fair overall, including its differential treatment of trade creditors.
4. Cross-class cram-down. Under section 901G of the Companies Act 2006, the Convertible Loan Holders would be no worse off under the plan than under the relevant alternative, and the second statutory condition was met because the Administration Creditors approved the plan by the required majority.
5. Directions and order. Although no formal directions application had been made, all relevant material was before the court. The administrators had identified no distinct company interest, beyond the interests considered in the Part 26A process, which justified refusal. They were directed to provide the company’s consent. The plan was then sanctioned and consequential orders were made; the administrators’ application for directions to sell the business was dismissed.