Chandlers Building Supplies Holdings Limited & Ors, Re

At a convening hearing for restructuring plans under Companies Act 2006 Part 26A, the court performs a limited gateway function. It considers notice, jurisdiction, statutory conditions, class composition, obvious roadblocks and procedural directions. It does not decide whether the plans are fair or whether they should ultimately be sanctioned.

Class composition requires comparison of creditors’ strict legal rights and the rights available under the plans, assessed against the relevant alternative. Differences do not necessarily require separate classes where creditors can consult together in pursuit of their common interests. Unnecessary proliferation of classes should be avoided, but material differences and materially different treatment may justify separate classes.

A restructuring plan may alter financial obligations under leases, including rent, provided proprietary rights are not altered and the landlord retains a right to terminate.

Thirteen companies in the Turbo Group applied for permission to convene creditor meetings to consider 13 inter-conditional restructuring plans under Part 26A of the Companies Act 2006. The plans proposed compromises affecting secured lenders, landlords, business-rate creditors and other unsecured creditors, as part of a wider restructuring intended to avoid administration or liquidation.

The application concerned the convening stage. The court had to determine whether notice was adequate, whether the statutory threshold conditions and jurisdictional requirements were satisfied, whether the proposed creditor classes were properly constituted, whether any obvious roadblocks existed, and what directions should govern the meetings.

The application was granted and directions were made for the proposed creditor meetings.

1. Convening-stage function. The court’s role at this stage is limited. It considers notice, jurisdiction, the Part 26A threshold conditions, class composition, obvious roadblocks and meeting directions. Questions of fairness and the likelihood of sanction are reserved for the sanction hearing. The court relied on Telewest Communications Plc [2004] BCC 342 at paragraph 14.
2. Notice and threshold conditions. Notice was adequate and had been given to the creditors in sufficient time, having regard to the complexity and urgency of the plans. The companies had encountered financial difficulties affecting their ability to continue as going concerns, and the proposed compromises were intended to mitigate those difficulties. Conditions A and B in section 901 of the Companies Act 2006 were therefore satisfied.
3. Class composition. The court applied the established inquiry: identify differences in creditors’ strict legal rights or rights under the proposed arrangement, then ask whether creditors can consult together with a view to their common interests. The comparison must include the relevant alternative. The court must avoid unnecessary proliferation of classes, while recognising that material differences and materially different treatment may justify separate classes. Fairness of differential treatment is not determined at this stage. The court relied on AGPS BondCo PLC [2024] BLR 745 at pages 109–114, Sovereign Life Assurance Co (In Liquidation) v Dodd [1892] 2 Q.B. 573 at page 583, Re Hawk Insurance Co Ltd [2002] BCC 300 at paragraph 30 and OQ Chemicals Holding Drei GmbH [2024] EWHC 2036 (Ch) at paragraphs 38–40.
4. Leases and secured debt. The plans could modify financial obligations under leases, including reducing rent to zero, provided that landlords retained rights to end the leases. The plans could not interfere with forfeiture rights, require surrender, or otherwise alter proprietary rights. The court also accepted the contribution and release structure used to address ricochet claims, having regard to E D & F Man Holdings Ltd, Re [2022] EWHC 687 (Ch) at paragraphs 65–66.
5. Classes and directions. Separate classes were justified for secured creditors, five categories of landlords, business-rate creditors and general unsecured creditors. Future business-rate liabilities were outside the plans’ jurisdiction; only accrued liabilities, including liabilities for the current rate year, could be compromised. Meeting and sanction timetables were directed in accordance with the draft order and annex.