Poundland Limited, Re

At a restructuring-plan convening hearing, the court must consider jurisdiction, class composition, notification and other matters that could prevent later sanction. Adequate notice is fact-sensitive. Classes should contain creditors whose rights are not so dissimilar as to make consultation in a common interest impossible. The comparison includes both rights surrendered and rights received. The court should avoid artificial fragmentation designed to facilitate cram down. Meetings may be convened despite incomplete delivery or limited consultation where all reasonable steps have been taken, with appropriate safeguards for creditors.

Poundland Limited applied under Part 25A of the Companies Act 2006 for meetings of 14 classes of creditors to consider a restructuring plan. The plan addressed landlord liabilities, business rates and other unsecured claims, while excluding specified operational liabilities and leaving shareholder rights uncompromised.

The company faced an imminent cash shortfall and identified administration as the relevant alternative. The application concerned the convening hearing and raised issues concerning jurisdiction, notice, class composition, disclosure and the conduct of virtual meetings.

1. The court was satisfied that the statutory conditions and procedural requirements for convening meetings were met. The company had encountered, or was likely to encounter, financial difficulties affecting its ability to carry on business as a going concern.
2. Adequate notice is fact-sensitive, depending on matters including plan complexity, financial urgency and creditor sophistication. Despite incomplete delivery and limited consultation, Poundland had made all reasonable efforts. Creditors’ ability to raise matters at the sanction hearing was preserved.
3. Class composition depends on whether creditors’ rights are so dissimilar that consultation in a common interest is impossible. The court must consider both rights in and rights out. The proposed landlord classes reflected commercially material differences and were not artificial fragmentation designed to facilitate cram down.
4. The explanatory statement required fuller disclosure concerning shareholder effects, management incentives and a potential concern about the independence of financial advice.
5. Virtual meetings were appropriate for the large and geographically dispersed creditor body, provided creditors had an adequate opportunity to consult. The convening order was made subject to the required amendments and directions.