Lecta Paper UK Limited, Re
[2023] EWHC 2908 (Ch)
Link Fund Solutions Limited, Re
12 October 2023
[2023] EWHC 2641 (Ch)
High Court
A company wants to pay back investors who lost money. Some investors argued they should get paid differently than others. The judge said everyone gets paid the same way because the rules don't say otherwise. The judge said that the different treatment of investors can be dealt with later.
Key Facts
- •Link Fund Solutions Limited (LFSL) applied for a single meeting of creditors to approve a scheme of arrangement under Part 26 of the Companies Act 2006.
- •The scheme settles claims from investors with losses from the collapsed LF Equity Income Fund.
- •The scheme is supported by the FCA and funded by asset sales, insurance, and a parent company contribution.
- •Objections were raised regarding single-class creditor meeting, notification process, and voting form.
- •The court focused on the class composition issue, with objections mainly from Leigh Day and Harcus Parker claimants.
- •The Fund, managed by Neil Woodford, collapsed in 2019, leaving investors with significant losses.
- •The FCA investigated LFSL, alleging regulatory breaches and proposing a significant penalty and restitution.
- •LFSL and its parent company reached a conditional settlement with the FCA, leading to the proposed scheme.
- •Three groups of investors issued claims against LFSL for alleged breaches of FCA regulations.
Legal Principles
A class of creditors must be confined to those whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest.
Sovereign Life Assurance v Dodd [1892] 2 QB 573
Consideration of creditors' rights if the scheme is not implemented and rights under the scheme if implemented.
Re Hawk Insurance [2002] BCC 300
Differences in commercial interests, not derived from legal rights against the company, are not grounds for dividing the class.
Re UDL Holdings [2002] 1 HKC 172
Differences in creditor rights are not necessarily fatal to a single class; the question is whether it's impossible for creditors to consult together.
Re Noble Group [2018] EWHC 2911 (Ch)
Rights against third parties are generally regarded as interests, not rights.
Re Gategroup Guarantee [2021] EWHC 304 (Ch)
The relevant question is whether differences in creditor positions are attributable to differences in legal rights against the company under the scheme.
Re UDL Holdings [2002] 1 HKC 172
Outcomes
A single class meeting of creditors should be convened.
All Scheme Creditors have materially the same existing rights against LFSL; their rights under the Scheme will also be materially similar. Differences in the strength of claims or access to the FSCS do not create sufficiently dissimilar rights to justify separate classes.