OutsideClinic Ltd (The Companies Act 2006), Re

At a convening hearing for a restructuring plan, the court must be satisfied that the statutory jurisdictional and threshold conditions are met, that the proposed creditor classes reflect materially different rights, and that the explanatory statement contains sufficient information for informed voting. Where those requirements are satisfied, the court may convene separate meetings for the appropriate classes and give directions for the sanction hearing. Adequate notice remains a necessary procedural safeguard, but its sufficiency is assessed in the circumstances, including whether affected parties had a proper opportunity to make observations.

OutsideClinic Ltd applied for an order under section 901 C of the Companies Act 2006 convening meetings of creditors to consider a restructuring plan under Part 26A. The company, an in-home audiology and optometry provider, sought to restructure its indebtedness after financial difficulties. Seven creditor categories were proposed, including a secured creditor, HMRC, retention-of-title creditors, landlords, an onerous-contract creditor and general unsecured creditors.

The court considered notice, jurisdiction, the statutory threshold conditions, class composition, the explanatory statement and arrangements for the meetings and sanction hearing.

1. Application granted. The court made the convening order, subject to revised timetable directions. Meetings were directed for 17 and 18 March, with the sanction hearing listed for 27 and 28 March.
2. Adequate notice had been given of the convening hearing. Although the hearing date had changed and one creditor had initially been omitted from circulation of the practice statement materials, that creditor was subsequently notified and raised no objection. Interested parties had an appropriate opportunity to make observations.
3. The statutory jurisdictional requirements were satisfied. The company was registered in England and Wales and liable to be wound up by the court. The plan raised no concern concerning non-UK creditors or the exercise of international jurisdiction.
4. The threshold conditions under Part 26A were met. The company had encountered, or was likely to encounter, financial difficulties affecting its ability to continue as a going concern, and the proposed compromise or arrangement was intended to eliminate, reduce, prevent or mitigate those difficulties. The evidence showed balance-sheet insolvency, likely significant cash-flow difficulties and an imminent risk of cessation of trading.
5. Seven separate creditor classes were appropriate because the creditors possessed materially different contractual, proprietary or statutory rights, or were subject to materially different treatment under the plan. Separate meetings were therefore required.
6. The explanatory statement was sufficiently informative despite its length. It enabled affected creditors to assess their positions and vote on a properly informed basis.
7. Directions were also given for any expert evidence HMRC wished to serve in response to the company’s evidence, with service required by 4pm on 21 March.

First-instance convening application. No prior appellate decision is stated in the judgment.