The company became insolvent and joint administrators were appointed. The administrators decided to pursue a scheme of arrangement under Part 26A of the Companies Act 2006. They proposed a restructuring plan and meetings of the various classes of creditors were held. The administrators applied to the court for sanction of the proposed scheme. A creditor objected to the proposal on grounds including that it failed the test of fairness. The court had jurisdiction to override the views of a dissenting creditor and sanction the scheme under section 901G of the 2006 Act if two threshold conditions were met. Condition A, which was set out in Section 901G(3), required the court to be satisfied that, if the compromise or arrangement was sanctioned, the dissenting creditor would not be any worse off than it would be in the event of the relevant alternative, in this case, immediate liquidation. The administrators contended that that outcome had to be established by them on the balance of probabilities, whereas the creditor contended that the administrators had to demonstrate that there was no real prospect or no realistic possibility of such an outcome.
On the administrators’ application—
Held, application granted. For the purposes of section 901G(3), the court had to be satisfied on the balance of probabilities that the dissenting creditor would not be any worse off under the scheme than it would be in the event of an immediate liquidation. The longer the period of time over which the events in question fell to be examined and assessed, the more difficult it would be to satisfy the court as to the probabilities and the easier it would be to refute the contention that the dissenting creditor would be no better off under the relevant alternative than under the plan. However, having investigated the dissenting creditor’s challenges, the administrators had establish, on the balance of probabilities, that the creditor was no worse off under the scheme than it would be in an immediate liquidation. In the circumstances it was appropriate to exercise the court’s discretion to sanction the scheme (paras 56, 57, 77, 79).
Marcus Haywood (instructed by Pinsent Masons LLP) for the joint administrators.
William Willson (instructed by Brown Rudnick LLP) for a scheme creditor.
Andrew Mace (instructed by Shakespeare Martineau LLP) for the dissenting creditor.