Poundland Limited, Re

When sanctioning a restructuring plan under Part 26A of the Companies Act 2006, the court must assess the relevant alternative, the statutory cram-down conditions and the fairness of imposing the plan on dissenting classes.

Fairness requires a fair sharing of the restructuring burden and of the value preserved or generated by the plan. The relevant alternative is the starting point, but the court must consider substance rather than form, the source of benefits, differential treatment, new money and the interests of persons outside the compromises. Where opposition is unreasoned, the court may conduct a high-level review, while retaining an independent discretion.

Poundland Limited sought approval of a restructuring plan designed to address imminent cash-flow insolvency, preserve its retail business and restructure its leasehold liabilities and financial debt. The plan had been approved by some creditor classes but rejected by most landlord classes and by General Creditors.

The court had already convened the plan meetings. At the sanction hearing it considered the relevant alternative, the statutory conditions for imposing the plan on dissenting classes, the fairness of the proposed allocation of burdens and benefits, the significance of the voting results and the effect of the plan in Scotland and Northern Ireland.

1. The restructuring plan was approved. Poundland faced imminent insolvency and an asset-realisation administration was the relevant alternative. The plan passed the rationality test because an intelligent and honest class member could reasonably approve it having regard to that class’s interests.
2. The condition in section 901G(3) of the Companies Act 2006 was satisfied. No dissenting creditor would be worse off than in the relevant alternative. Returns were enhanced, paid earlier, or supported by continued occupation and break rights.
3. The condition in section 901G(5) was also satisfied. At least one assenting class had a genuine economic interest in the relevant alternative. The single-member classes resulted from a robust open-market sale process and were not artificially created.
4. In exercising the cram-down discretion, the court adopted principles requiring fair sharing of the burdens and benefits, with the relevant alternative as the starting point. Differential treatment was permissible where rationally justified. The court could consider new money, the source of preserved value, treatment of non-compromised stakeholders and the evolution of the plan, focusing on substance rather than form.
5. The absence of reasoned opposition justified a high-level review. A creditor proposing a fairer alternative should present a coherent and achievable plan, rather than requests for preferential treatment. The landlord classifications and allocation of benefits had rational commercial bases and were not fundamentally unfair.