Poundstretcher Limited, Re

At the convening stage of a restructuring plan, the court examines jurisdiction, statutory gateway conditions, notification, class composition and any apparent roadblocks. It does not determine the fairness or adequacy of the proposal, which is ordinarily reserved for the sanction hearing. A plan must involve sufficient give and take to constitute an arrangement, but the court need not assess the adequacy of that exchange at this stage. Class composition is assessed by asking whether the proposed classes are rational and free from contrivance. The court may give directions to ensure that objections, evidence and expert issues can be dealt with efficiently at sanction.

Poundstretcher Limited sought an order under section 901C of the Companies Act 2006 to convene meetings of creditors to consider a restructuring plan under Part 26A. The plan addressed secured lending, intercompany liabilities, business rates and a portfolio of approximately 304 leases. Certain employees, suppliers and HMRC were excluded from the plan.

The court considered jurisdiction, the Part 26A gateway conditions, whether the proposal constituted an arrangement, notification, the proposed 14 creditor classes, notified objections and potential cross-border issues concerning Scottish and Northern Irish leases. The central issue was whether the plan should proceed to class meetings and, if so, on what directions.

1. Convening stage. The court ordered that the proposed creditor meetings should be convened. Following Re Telewest Communications plc [2004] EWHC 924 (Ch), the court’s function at this stage was emphatically not to determine the fairness of the proposal. Fairness was reserved for the sanction hearing. The court instead considered jurisdiction, notification, class composition and any roadblocks or objections requiring further evidence or directions.
2. Jurisdiction and arrangement. The Plan Company was a company within Part 26A and the statutory gateway conditions were satisfied. The proposal involved sufficient give and take between the constituencies and the company to constitute an arrangement. The court was not required at this stage to assess the adequacy of that exchange.
3. Classes. The proposed separate classes for the ABL Lender, SLA Lender, Intercompany Lender, General Creditors and Business Rate Creditors were appropriate. The proposed divisions among landlord creditors, including guaranteed landlord creditors and leases requiring different levels of rent reduction, were rational and showed no contrivance. The 14 proposed classes were approved.
4. Notification and directions. The Practice Statement Letter, sent approximately 37 days before the hearing, together with a virtual townhall meeting, provided sufficient notification and information. Directions were amended to ensure that creditors could obtain access to a virtual meeting where necessary and to advance deadlines for objectors’ evidence and submissions, the company’s response and skeleton arguments.
5. Roadblocks. No present roadblock prevented the plan proceeding. Expert evidence under CPR 35 was directed concerning recognition and effectiveness in relation to Scottish- and Northern Irish-law leases.