The so-called restructuring plan is a tool introduced by the Corporate Insolvency and Governance Act 2020 that is most likely to be used by large companies. It has been designed to facilitate overcoming a company’s financial difficulties by means of a compromise or arrangement between the creditors and/or members of the company.
It is similar to a Scheme of Arrangement under Part 26, Companies Act 2006. Indeed, the restructuring plan legislation forms a new Part 26A of the Companies Act. However, a principal distinction of a restructuring plan is that the company must have encountered, or be likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern.
The plan needs to be approved by 75% of a class of creditors or members who would receive a payment or have a genuine economic interest in the company if the plan were not to proceed. The court can then compel all other classes of creditors or members to accept the plan, provided that no creditor or member in the dissenting classes would be worse off than if the plan did not go ahead. This is the mechanism for cross-class cram down, which is a notable feature of the restructuring plan procedure.
A restructuring plan can be proposed by a company subject to a moratorium, by an administrator or a liquidator, or (probably less likely) by a creditor or member.
Since 26th June 2020 when the new law came into effect the UK’s first restructuring plan has already been proposed by Virgin Atlantic. The plan, which already has the backing of key financial stakeholders, is scheduled to be put before a stakeholder meetings during the week commencing 17 August.