In the Matter of Nasmyth Group Limited

At a convening hearing for a restructuring plan, the court does not decide the plan’s merits or fairness. It considers jurisdiction, the statutory threshold conditions, class composition, apparent impediments to sanction, and notice and meeting arrangements.

Class composition turns on creditors’ rights, assessed against the most likely alternative if the plan is not sanctioned, rather than on interests alone. Unresolved objections may be revisited at sanction where further evidence is available.

Nasmyth Group Limited applied under Part 26A of the Companies Act 2006 for directions to convene creditor meetings concerning a proposed restructuring plan. The company was cash-flow insolvent, in default under secured facilities and facing possible administration.

HMRC and two creditors raised objections concerning jurisdiction, threshold conditions, class composition, possible impediments, notice and information. The issue was whether meetings should be convened without determining the plan’s merits or fairness.

1. The court ordered the restructuring-plan meetings to be convened, subject to amendments to the Explanatory Statement and further creditor engagement. An expedited sanction hearing was directed.
2. Section 901A of the Companies Act 2006 was satisfied. Conditions A and B under section 901(2) and (3) were also met. The company had financial difficulties affecting its ability to continue as a going concern, and the proposed compromise was intended to mitigate those difficulties.
3. At the convening stage, threshold conditions are assessed on the evidence then available. They may be reconsidered at sanction if objections remain and further evidence is produced. Concerns about merits or fairness do not ordinarily determine the threshold question.
4. Administration was the relevant alternative under section 901G because it was the event most likely to occur if the plan were not sanctioned. Class composition focuses on rights, including rights under the plan, rather than interests. Separate classes for the senior secured creditor, junior secured creditor, preferential creditor and inter-company creditors were appropriate. The position of two unsecured creditors remained open for determination at sanction.
5. A threatened but unissued injunction and unresolved HMRC payment arrangements were not current roadblocks. Notice was adequate, but fuller information about critical supply creditors, including connected creditors, was required.