On 17 May 2021, in the third of a trio of landlord challenge cases, the English High Court revoked Regis UK Limited's company voluntary arrangement (CVA) on one ground of unfair prejudice, but ruled against landlords seeking repayment of fees against the nominees.

The facts

The Regis CVA was approved by creditors on 26 October 2018. Certain landlords challenged the CVA on grounds of material irregularity and unfair prejudice. The company entered administration a year later and the CVA automatically terminated. The landlords continued to pursue the CVA challenge that the nominees had breached their duties and should therefore be obliged to repay their fees.

The decision 

• The CVA was revoked on the basis that the treatment of one of the intercompany loans as a "critical creditor" was not justified and the preferential treatment it received was unfair to impaired creditors. As the CVA had already terminated this has little practical effect.
• All other grounds of unfair prejudice or material irregularity advanced by the landlords were dismissed for the same reasons as the New Look decision. The break rights given to landlords mitigated unfairness caused by modifications (primarily rent reductions) to the lease terms and the proposal had offered a more favourable outcome than the relevant alternative (administration).
• The court held that applying a blanket 75% discount to all categories of landlords’ claims over future rent for voting purposes was not justified, however, there was no material irregularity. In New Look a smaller blanket discount of 25% had been justified. 
• Despite the finding of breach of duty on one ground, in the absence of bad faith or fraud, the court declined to order any relief against the nominees.

Key takeaways

The judgments in Regis and New Look will reassure retailers of the continued use of CVAs as a flexible restructuring tool. However, watch this space – landlords in New Look have been given permission to appeal the judgment on all grounds of challenge in that case. 

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.