We’re going through uncertain times and a volatile period for businesses.
The Restructuring Plan procedure was introduced as part of the Corporate Insolvency and Governance Act 20202 (“CIGA 2020”). It’s a powerful and flexible tool to help businesses facing financial distress survive and avoid a formal insolvency process.
Our team are the leading experts in the Restructuring Plan procedure, and can advise on all aspects of the process.
What Is A Restructuring Plan?
A Restructuring Plan is a formal compromise between a company and its creditors and/or or shareholders. They help companies facing financial difficulty to reach a compromise with creditors and/or shareholders in order to continue to trade and be able to continue as a going concern.
Restructuring Plans share some of the key features of the existing Scheme of Arrangement procedure and the Company Voluntary Arrangement process, while being distinct from both.
Why Choose A Restructuring Plan?
The main benefit of the Restructuring Plan procedure is the ability – in certain circumstances -to agree a binding plan, sometimes even where there are dissenting classes of creditors. This is otherwise known as the ability to ‘cross-class cram down’.
A Restructuring Plan requires creditors and shareholders to vote in classes. If 75% of each class vote in favour, the plan will be considered to be approved. The Plan must be sanctioned by the Court, over the course of two hearings.
Restructuring Plans also have some key features which set them apart from the Company Voluntary Arrangement (CVA) procedure used in the UK, such as:
- The ability to bind secured creditors in addition to unsecured creditors
- The ability to cram down dissenting creditor classes
- Members’ rights can be compromised.
When Is A Restructuring Plan An Option, And Who Can Use One?
Since its introduction in 2020, we’ve seen the Restructuring Plan process used by a number of businesses, including: Virgin Atlantic Airways, DeepOcean, and Virgin Active.
A Restructuring Plan can be used for both SMEs and large corporates. Read our case study below where we advised on the landmark first use of the legislation to secure the future of an SME in distress.
How Can We Help?
Our expert lawyers have advised a range of businesses looking at entering into a Restructuring Plan, including advising on the landmark case of Re Houst Limited, the first SME restructuring plan. We’ve also advised creditors of companies which are affected by a proposed Restructuring Plan who need advice about their position and the compromise they’re being asked to accept.
If a Restructuring Plan is an appropriate way forward for your company and/or or you’re a creditor affected by a proposed Restructuring Plan, our team can provide:
- Advice on the legal procedure and the implications of the process;
- Advice on creditor class composition and viability of the Restructuring Plan, together with the proposed Plan Administrator (an insolvency practitioner who provides evidence of valuation and the relevant alternative in support of the plan)
- Draft documentation for the Restructuring Plan, including the required Practice Statement Letter, Explanatory Statement, the Restructuring Plan document, claim form, witness statements, and draft orders for the Plan Meetings of creditors / members and for the sanctioning the plan
- Advice and assistance on other legal aspects throughout the process.
Our experience and pricing structure makes the Restructuring Plan a viable option for companies of most sizes and turnover. We have specialist expertise in the Consumer and Manufacturing sectors, which are both likely to face significant challenges in the next 12 months.
We can also provide advice to creditors or members of plan companies. We can help you understand the Restructuring Plan process and its impact, and advise you on protecting your position and future steps.
You can find out more about Restructuring Plans, including the procedure and cross-class cram down, by downloading our guide to restructuring plans.
Call our restructuring plans experts on 0808 291 4717 or contact us online to find out more about how we can help.