Key Facts
- •Application for sanction of a restructuring plan under Part 26A of the Companies Act 2006.
- •The Great Annual Savings Company Limited (the Company) is the applicant.
- •The plan affects the Company's sole shareholder, Project Byron Newco Limited (the Parent Company), and its shareholders.
- •12 out of 15 creditor classes voted 100% in favor of the plan; 3 classes voted against, including HMRC.
- •HMRC and four Category 3 Energy Suppliers oppose sanction.
- •The plan involves a debt/equity swap for the Secured Creditor and waiving interest for Connected Party Creditors.
- •HMRC's debt is approximately £7.46m, comprising PAYE, NIC, and VAT liabilities.
- •The relevant alternative is a non-going concern sale in administration, resulting in liquidation of the Parent Company.
- •The plan proposes a 'Secondary Preferential Creditor Fund' for HMRC with estimated returns of £600,000.
- •Critical Creditors (Category 1) will be paid in full under the plan.
Legal Principles
Section 901F Companies Act 2006 requires support of all creditor classes by a 75% majority (by value) for plan sanction.
Companies Act 2006
Section 901G Companies Act 2006 allows sanction even without the required majorities if two conditions are met: (A) dissenting creditors are no worse off under the plan than in the relevant alternative, and (B) at least one class of creditor with a genuine economic interest in the relevant alternative approves the plan by a 75% majority.
Companies Act 2006
The burden of proof rests on the company to show, on the balance of probabilities, that dissenting creditors would be no worse off under the plan than in the relevant alternative.
Case Law (Re Amicus Finance plc)
The court can disregard expert evidence even without opposing expert evidence if there are manifest errors or inconsistencies.
Case Law (Griffiths v. TUI (UK) Ltd)
In assessing fairness, the court considers existing creditor rights, additional contributions, and justification for differential treatment.
Case Law (Re Virgin Atlantic Airways, Re DeepOcean)
The court considers whether the plan provides a fair distribution of benefits between assenting and dissenting classes.
Case Law and academic articles (Mokal, Paterson)
Part 26A does not require preserving the order of priorities that would apply in insolvency; a different order can be justified with good reason.
Case Law (Re Houst Ltd)
Outcomes
The court found the company did not discharge the burden of proving HMRC would not be worse off under the plan.
The court found the valuation of the company's debtor book was not robust and insufficiently addressed potential recoveries from third-party claims.
Even if the company had met the burden of proof, the court would have exercised its discretion to refuse sanction.
The court found the plan unfairly disadvantaged HMRC by prioritizing other creditors, particularly those who would receive nothing in the relevant alternative, without sufficient justification. The court considered HMRC's concerns about the existing management team and potential claims against third parties.