Fossil (UK) Global Services Ltd, Re

When sanctioning a Companies Act 2006 Part 26A plan without cross-class cram-down, the court should consider statutory compliance, fair representation and bona fide voting, whether the plan is one that creditors might reasonably approve, and any blot or defect. A strong creditor vote attracts substantial weight, but only after the court has considered whether creditors received sufficiently clear and accessible information and whether internal constituencies had extraneous interests. The opportunity to provide new money does not by itself invalidate a single class or the vote, although its terms may affect the weight given to the result. A plan restructuring foreign-law debt may be sanctioned where there is a reasonable prospect of foreign recognition and no conflict with the foreign jurisdiction’s public policy.

The court was asked to sanction a restructuring plan under Part 26A of the Companies Act 2006. Cawson J had previously convened a single-class meeting of noteholders. At that meeting, 99.99% by value of those voting approved the Plan. Retail noteholders comprised approximately 25% of the class and were represented by a Retail Advocate.

The Plan involved restructuring debt issued by a United States corporation through an English plan company. The issues were whether the statutory requirements and class constitution were satisfied, whether the meeting fairly represented creditors, whether creditors could reasonably approve the Plan, and whether any defect or issue concerning foreign recognition prevented sanction.

1. Outcome. The Plan was sanctioned.
2. The court adopted the four-question approach applicable to Part 26A plans without cross-class cram-down, as identified by Snowden LJ in Re AGPS Bondco Plc ([2024] EWCA Civ 24): statutory compliance; fair representation and bona fide voting for proper purposes; whether the Plan was fair and one that a creditor might reasonably approve; and whether any blot or defect made it unlawful or inoperable.
3. The statutory requirements were satisfied. The convening order was complied with, the jurisdictional preconditions in section 901A were met, the explanatory material was appropriately explained and accessible, the statutory majority was achieved, and the single class was properly constituted. Class composition depends on rights rather than interests. The fact that retail noteholders might be less willing or able to provide new money did not fracture the class.
4. The limited rationality test was appropriate. Its use depends on creditors receiving sufficient, clear and accessible information, and on the vote not being materially distorted by extraneous interests. The Plan offered all creditors a better outcome than the relevant alternative. Retail creditors had received satisfactory guidance, and the new-money terms had been rigorously market-tested. The opportunity to provide new money was open to all, but that factor was not determinative. The Plan was one that creditors could rationally approve.
5. The court found no blot. Excluding trade creditors was justified. A limited release protecting directors and advisers from personal liability to noteholders was not objectionable. Although the Plan used an English restructuring process to adjust United States debt, expert evidence established a reasonable prospect of recognition by a United States bankruptcy court and no conflict with United States public policy. The court would not be acting in vain by sanctioning the Plan.