Re Everyday Lending Limited
[2023] EWHC 2097 (Ch)
In the matter of Morses Club Scheme Limited
26 May 2023
[2023] EWHC 1365 (Ch)
High Court
A big loan company had lots of angry customers wanting their money back. They came up with a plan to give some money back to everyone, and a judge approved the plan because it's better than the company going bankrupt and customers getting almost nothing.
Key Facts
- •Morses Club Scheme Limited (SchemeCo) sought court sanction for a scheme of arrangement under Part 26 of the Companies Act 2006.
- •SchemeCo is a wholly-owned subsidiary of Morses Club Limited, the UK's largest home collected credit provider.
- •Morses Club faced a surge in customer redress claims related to loan affordability and sustainability checks.
- •The scheme aimed to compromise redress claims and Financial Ombudsman Service (FOS) fees.
- •The scheme proposed a 20 pence in the pound return to creditors.
- •A claims methodology, reviewed by the FCA, was implemented to determine claim amounts.
- •Funding for the compensation fund came from shareholder investment, future cash flows, and Morses Club's net assets.
- •97.7% of creditors by number and 97.4% by value voted in favor of the scheme.
- •The FCA initially raised concerns but ultimately did not oppose the scheme.
Legal Principles
A company proposing a scheme of arrangement can choose which creditors to compromise with, so long as there are good commercial reasons.
Case Law
The court must consider whether the scheme complies with statutory requirements, if the class was fairly represented, if an intelligent and honest person might reasonably approve, and if there are any defects.
Re Telewest Communications (No. 2) Limited [2005] 1 BCLC 772; Re KCA Deutag UK Finance plc [2020] EWHC 2977 (Ch)
The court's jurisdiction to sanction a scheme is engaged if a majority in number representing 75% in value of creditors present and voting agree.
Companies Act 2006, s. 899
In assessing class composition, the relevant comparator is often insolvent administration.
Re Lecta Paper (UK) Ltd [2020] EWHC 382 (Ch); Re Provident SPV Ltd [2021] EWHC 1341 (Ch); Amigo (No. 2) [2022] EWHC 549 (Ch)
Outcomes
The court sanctioned the scheme of arrangement.
Statutory majorities were met; the class was fairly represented; the scheme was one an intelligent and honest person might reasonably approve; and there were no significant defects.