Amicus Finance Plc – Holistic and Practical Approach of the English Court to Part 26A Restructuring Plans Confirmed

The Approved Judgment setting out the reasons for the sanctioning of Amicus Finance Plc’s Part 26A Restructuring Plan has been handed down.

In August of this year, the administrators of Amicus Finance Plc (Amicus) received the sanction of the court to Amicus’ Part 26A restructuring plan (the Plan). The Plan received its fair share of attention as Amicus as it was a first on two counts, being the first SME to avail itself of the new Part 26A Restructuring Plan introduced by the Corporate Insolvency and Governance Act 2020 and also the first such Restructuring Plan put forward by incumbent insolvency practitioners as a route for exiting administration.

Sir Alastair Norris has now released his detailed judgment following the sanctioning of the Plan. This judgment once again emphasises the pragmatic, yet considered, approach that the Court has adopted in considering restructuring plans and is worth a read for all R&I professionals (it is also reasonably short and sharp in its approach, if that can help tempt you!). A full copy of the judgment can be found here, but the following points stand out:

• Interests of the company’s creditors as a whole: An emphasis on the position that administrators should only be promoting a Part 26A restructuring plan where it is in the interests of the company’s creditors as a whole so to do. The Plan ultimately met this test and the point will not be a surprising one to insolvency practitioners in general terms, but is one that could easily be lost sight of where fraught discussions around valuation and class constitution receive more focus;
• Provision of information and disclosure: An openly pragmatic balance should be struck between the promoters of a Part 26A restructuring plan providing sufficient information to allow for “proper scrutiny and a proper outcome” while still allowing a Part 26A restructuring plan to be completed within a desirable timeline. In the case of the Amicus, a separate hearing around disclosure had previously been heard by Mr Justice Zacaroli and, as the sanction judgment makes clear, the judge was prepared to take into account the information that the administrators had provided to creditors during the period of the administration which had been ongoing since 2018, this being one differentiating factor from the Sunbird case¹ where questions over the level of information provided was also raised by dissenting creditors. In short, the “touchstone” is whether the information provided in the explanatory statement to a Part 26A Restructuring Plan is sufficient for creditors to make a choice between the compromise offered by the plan in question or the relevant alternative (in Amicus’ case, this was liquidation), it is not whether the fullest specific information reasonably obtainable has been included²;
• Fairness remains a “divining rod by which special interests can be discerned"³: In the case of the Plan, the judge took the view that the Plan was one that it was rational for the supporting creditors to vote for (even taking into account any levels of connectedness) and re-emphasised that in the context of a purely commercial Part 26A restructuring plan (as opposed to a redress type scheme) it is not the court’s job to decide whether the plan is the best one, could be improved upon or is the only fair one that could have been proposed, but only to ensure it is “one approved by the requisite majority of properly informed and consulted creditors acting in accordance with their ordinary class interests and not oppressively in pursuit of some special interests"⁴;
• The “no worse off” test is based on the balance of probabilities: The judgment is clear that there is no requirement to demonstrate that there was “no real prospect” or “no realistic possibility” that the dissenting creditor would be better off pursuant to the Plan as opposed to the relevant alternative, but only that – on the balance of probabilities – they would be “no worse off”. The evidence provided by the administrators of Amicus of the very immediate cashflow issues faced by Amicus was considered a distinguishing factor to the facts in the Hurricane case in this respect and also in terms of establishing the appropriate “relevant alternative”, demonstrating that – as ever – the court will pay close attention to the factual position of the plan company in each case;
• Dissenting creditors must fully formulate their arguments around valuation: Many of the arguments before the court in respect of Amicus’ Plan focussed on the view taken by the opposing parties of the likely return to creditors that might be available under the relevant alternative of liquidation. The dissenting creditor was not however considered to have fully formulated or worked through these arguments in a number of respects and the judge was not persuaded that potential existence of a hypothetical claim was sufficient where no route to actual recoveries appeared realistic or feasible.

In summary, while the spoiler for the outcome of this case was provided in August, the judgment provides a welcome and clear view on how our judiciary are approaching Part 26A Restructuring Plans, in particular where companies in administration or SMEs are concerned. It also includes useful commentary around the pre-insolvency engagement of advisers which will no doubt be further scrutinised by insolvency practitioners and their risk and compliance colleagues.

Brown Rudnick LLP represented HGTL Securitisation and the Hartford entities in relation to the Plan and the proceedings, instructing Mr William Willson of South Square as its counsel .

For those who are new to Part 26A restructuring plans, you can find a link to our original alert on the same here.

Click to view the full alert.

¹Sunbird Business Services Ltd [2020] EWHC 2493 (Ch)
²Amicus Finance Plc (in Administration) [2021] EWHC 3036 (Ch) [37(a)]
³Amicus Finance Plc (in Administration) [2021] EWHC 3036 (Ch) [41]
⁴Amicus Finance Plc (in Administration) [2021] EWHC 3036 (Ch) [45]; Re Telewest Communications [2004] EWHC 1466 (Ch) [21]-[22]
⁵Amicus Finance Plc (in Administration) [2021] EWHC 3036 (Ch) [52]-[53]; Re Hurricane Energy Plc [2021] EWHC 1759 (Ch)