OutsideClinic Limited, Re The Companies Act 2006

The court was asked to sanction a restructuring plan under Part 26A of the Companies Act 2006. The principal issues were (i) whether the statutory requirements for convening and voting were satisfied for the several creditor classes (including the treatment of the Shop Landlords class), and (ii) whether the court should exercise its discretion to sanction the plan and, if necessary, impose it on dissenting classes by way of a cross-class "cram-down" under s.901G. The judge held that Condition A and Condition B for Part 26A were met (see CA 2006 s.901A), that five of seven creditor classes had assented by the statutory threshold under s.901F, and that the remaining dissenting classes could properly be bound because they were "out of the money" in the relevant alternative (administration) and would be no worse off under the plan (s.901G). The court also found adequate notice had been given despite a technical failure to post letters, and that there was no blot or unworkable feature in the plan. The plan was therefore sanctioned.

The applicant, OutsideClinic Limited, applied for sanction of a restructuring plan under Part 26A of the Companies Act 2006 to address liabilities including amounts due to HMRC and indebtedness secured to Shawbrook Bank Ltd. The convening hearing was on 21 February 2025; plan meetings occurred on 17–18 March 2025; the sanction hearing was 28 March 2025, and this judgment was handed down 11 April 2025.

Nature of the application: sanction of a Part 26A restructuring plan affecting seven classes of creditors in the context of likely administration as the relevant alternative. Relief sought was court sanction of the plan and, if required, use of the cram-down power to bind dissenting classes.

Key factual background: OutsideClinic had traded at a loss in recent years and owed HMRC circa £1.45m; Shawbrook was the secured creditor owed c. £5.5m. New funding of c. £2m from a subset of shareholders (the Investors) was proposed, together with share-based arrangements and concessions from Shawbrook including a £2m reduction and an extension of the facility. The plan proposed distributions to unsecured creditors (5p in the £), an enhanced HMRC Dividend (total 15p in the £), special shares for Investors and Shawbrook payable on a "Relevant Event", and other class-specific arrangements. Employees and certain critical suppliers were excluded or to be paid in full.

Procedural and legal issues: the court considered (i) adequacy of notice (an omission to post first-class letters was waived given email delivery and portal access); (ii) classification and voting results for seven creditor classes; (iii) the correct approach to whether a class is "assenting" or "dissenting" under s.901F and s.901G (including debate whether a single attending creditor can constitute a meeting in multi-member classes, as raised by reference to Re Altitude Scaffolding and earlier authorities); (iv) the relevant alternative (administration) and expected recoveries per the Interpath Advisory report; and (v) whether the statutory cram-down conditions were satisfied and whether the court should properly exercise its discretion to sanction the plan.

Court's reasoning and conclusions:

• The statutory conditions for Part 26A were satisfied: Condition A (s.901A(2)) and Condition B (s.901A(3)).
• Five of the seven classes clearly met the s.901F threshold (Secured Creditor, HMRC, ROT creditors, Unsecured creditors, Swindon Landlord). The Shop Landlords class raised a technical debate (only one of four attended, but that creditor represented 83% by value and voted for the plan); the judge treated the point as one for another day since the outcome was the same whether that class was treated as assenting or dissenting.
• The limited rationality test for assenting classes was satisfied: each assenting class was better off under the plan than in the relevant alternative and were properly informed.
• As to dissenting classes (the Onerous Contract Creditor and, if treated as dissenting, the Shop Landlords), s.901G conditions were met: no member would be worse off under the plan than in administration, and the plan had been approved by a class who would receive a payment in the relevant alternative (the Secured Creditor, and HMRC possibly). The dissenting classes were "out of the money" and had not objected; the court concluded this justified the exercise of discretion to cram down and sanction the plan.
• No operative blot or unworkable feature was identified that would prevent implementation.

Outcome: the restructuring plan was sanctioned. The judge made an order sanctioning the plan on the basis above.

This first-instance application to sanction the restructuring plan is granted: the court sanctioned the Part 26A plan. Rationale: the statutory conditions (s.901A) were met; five of seven creditor classes assented by the s.901F threshold; the remaining dissenting classes were out of the money in the relevant alternative and would be no worse off under the plan so the court properly exercised its discretion under s.901G to impose the plan by cram-down; notice defects were waived and there was no unworkable defect in the plan.