The restructuring plan (RP) procedure set out in Part 26A of the Companies Act 2006 has been widely considered to be out of the reach of SMEs due to excessive cost. So, the 22 July 2022 Houst Limited [2022] EWHC 1941 (Ch) decision, which involves a small property management enterprise, opens the doors for more Part 26A actions.
The “Interim Report on the Corporate Insolvency and Governance Act 2020” (published in March 2022) focused on the excessive costs (for valuations, two court hearings, and other filings) limiting its usefulness for SMEs. The Houst case illustrates that the court is open to being flexible as to the level of valuation evidence required from SMEs.
This new decision also impacts HMRC’s status as a secondary preferential creditor, since their claims were “crammed down” after the bank voted to approve the plan. Liabilities to customers, critical suppliers, and employees were excluded from the plan and paid in full.
New Section 901G of CA 2006 gives the court power to “cram down” a dissenting class when the court determines that the members of the dissenting class would be no worse off under the plan than if the relevant alternative (condition A) and that the plan has been approved by the requisite number of creditors voting in any class that would receive a payment, or have a genuine economic interest in the company, in the relevant alternative (condition B).
In this case, HMRC would likely receive 20 pence on the pound, according to the valuation analysis, which was greater than in the relevant alternative.