In the Matter of Nasmyth Group Limited

The court considered an application under Part 26A Companies Act 2006 for directions to convene creditor meetings to consider a proposed Restructuring Plan. It held that the court had jurisdiction and, on the evidence before it at the convening stage, that threshold Condition A (company in or likely to encounter financial difficulties affecting its ability to continue as a going concern) and Condition B (a compromise or arrangement proposed between the company and its creditors with the aim of addressing those difficulties) were provisionally satisfied.

The court approved the proposed class composition for five creditor classes (STB as senior secured creditor; JCP as junior secured creditor; HMRC as preferential creditor; inter‑company creditors who had consented; and other unsecured creditors), but left open a specific contention by two unsecured creditors that they might form a separate class to be determined at the sanction stage. The court authorised convening the Plan Meetings subject to specified amendments to the Explanatory Statement (including fuller identification and explanation of critical supply creditors and disclosure of those connected to the company), continued engagement with creditors and further documentary information where necessary, and directed that the sanction hearing be listed on an expedited basis.

The Company applied for an order under Part 26A of the Companies Act 2006 for directions to convene meetings of creditors to consider a Restructuring Plan proposed as an alternative to administration. The Practice Statement requirements and the company’s evidence (witness statements of its CEO, the BTG financial report, the Explanatory Statement and the draft Restructuring Plan) were considered at the convening hearing. Interested parties who appeared included HMRC and two individual creditors who were former shareholders/directors.

• Nature of the application: directions to convene creditor meetings under Part 26A for a scheme (Restructuring Plan) to compromise claims and to secure continued funding from the junior secured creditor JCP.
• Background: the Group suffered post‑sale deterioration in trading and cashflow, is in cashflow insolvency, is in default under secured facilities with STB and JCP, faces a statutory demand from a hedging counterparty, and requires urgent funding. STB is senior secured and will not be compromised in quantum; JCP is junior secured and will provide further funding only if the plan is sanctioned. Inter‑company creditors had consented to settlement for nil; unsecured and preferential creditors would receive a nominal distributed sum under the plan.
• Issues framed: (i) jurisdiction; (ii) whether threshold Conditions A and B are met; (iii) appropriate class composition; (iv) any roadblocks to sanction at this stage; and (v) adequacy of notice and content of the Explanatory Statement.
• Court’s reasoning: jurisdiction was established; on the material before the court the threshold conditions were provisionally satisfied and therefore meetings should be convened. The relevant alternative was held to be administration. Class composition was appropriate for five classes, though the contention that two unsecured creditors might be a separate class remained open for determination at sanction. Potential roadblocks (possible injunction to restrain a share transfer and HMRC time‑to‑pay decisions for subsidiaries) were not regarded as present obstacles to making a convening order. The court required improved disclosure in the Explanatory Statement concerning critical supply creditors and identified connected creditors, and permitted further creditor challenges to threshold conditions and other objections to be pursued at the sanction hearing. The court directed expedited listing of the sanction hearing (aiming, if possible, before 30 April 2023).

The court therefore made the convening order with specified amendments and directions for further engagement and disclosure; the sanction decision was left for a subsequent hearing.

The court made an order directing that Plan Meetings be convened under Part 26A but subject to specified amendments to the Explanatory Statement, further engagement and disclosure to creditors, and directed that the sanction hearing be listed on an expedited basis (estimated two to three days). The court provisionally found that jurisdiction and threshold Conditions A and B were met on the material before it, approved the proposed class composition for five classes but left open the specific class‑composition argument raised by two unsecured creditors for determination at the sanction hearing, and permitted creditors to raise outstanding objections at sanction.