In the matter of the Great Annual Savings Company Ltd
[2023] EWHC 1141 (Ch)
In the matter of Nasmyth Group Limited
28 April 2023
[2023] EWHC 988 (Ch)
High Court
The company wanted a court order to help it pay off its debts differently. But the plan depended on the tax man (HMRC) agreeing to a deal, and they refused. The judge said the plan was unfair to the tax man and wouldn't approve it, preventing the company from using this method to resolve its debt.
Key Facts
- •Nasmyth Group Ltd applied for an order for directions for restructuring plan meetings under Part 26A of the Companies Act 2006.
- •HMRC was the sole dissenting preferential creditor, and other unsecured creditors opposed sanctioning the plan due to perceived unfairness.
- •The plan proposed a compromise of creditor claims, with a "cross-class cram down" for HMRC.
- •Disputes arose regarding creditor valuations, notice of meetings, and the classification of certain creditors as "critical supply creditors."
- •The plan's success hinged on HMRC agreeing to time-to-pay (TTP) arrangements with the company's subsidiaries.
- •The company's board resolved to put the company into administration if the plan wasn't sanctioned.
Legal Principles
Court jurisdiction to sanction a plan under section 901F of the Companies Act 2006 requires satisfaction of threshold conditions in section 901A.
Companies Act 2006
Section 901G allows sanctioning a plan even with dissenting classes if conditions A (no worse off test) and B (75% agreement by value in a class with genuine economic interest in the relevant alternative) are met.
Companies Act 2006
"No Worse Off Test" involves identifying the most likely alternative if the plan fails, determining its consequences for dissenting classes, and comparing those to the plan's consequences.
Re Virgin Active Holdings Ltd [2021] EWHC 1246 (Ch)
Court considers all incidents of liability, including timing and security, when assessing the "No Worse Off Test."
Re Deep Ocean 1 UK Ltd [2021] EWHC 38 (Ch)
Creditors with no genuine economic interest in the company should not heavily influence the court's sanction decision.
Re Bluebrook Ltd [2010] BCC 2009 and Re Virgin Active Holdings Ltd
Court should scrutinize plans carefully when HMRC debts are involved, considering the involuntary nature of tax debts and potential for abuse.
Re Lo-Line Motors Ltd [1988] Ch 477 and Re Sevenoaks Stationers (Retail) Ltd [1991] BCLC 325
A "blot" is a technical or legal defect rendering a plan inoperable.
Re Virgin Atlantic Airways Ltd [2020] BCC 997
Outcomes
The court refused to sanction the restructuring plan.
The plan's success depended on HMRC agreeing to TTP arrangements, creating a "roadblock." The court also found the plan unfair to HMRC due to the small share of the restructuring surplus allocated to it, considering the size of the debt and the company's failure to address it proactively. The court also considered the potential for abuse of Part 26A if such plans were routinely used to avoid tax liabilities.