The Two Conditions for the Part 26A Cram Down

Abstract

This article considers the two conditions that must be met before the Court may “cram down” one or more dissenting classes of creditors or members by sanctioning a plan pursuant to Part 26A of the Companies Act 2006 (inserted by the Corporate Insolvency and Governance Act 2020). Condition A effectively requires that only the restructuring surplus — the value likely to be preserved and perhaps created by the implementation of the proposed plan — be in play in relation to a dissenting class which is sought to be crammed down. This constitutes a key safeguard against expropriative redistribution of value from dissenting classes to others. Condition B appears based on but is different from the US Bankruptcy Code provision that the court may only approve a plan if at least one impaired class has accepted it. This article draws out the similarities and differences between Condition B and its US inspiration, then draws on US and UK jurisprudence to show how Condition B may most efficaciously be interpreted. The cram down jurisdiction as a whole and Condition B in particular are open to harmful manipulation in several ways. Both US and UK jurisprudence potentially provides the resources that UK courts will need to counter such manipulation.