London Resort Company Holdings Limited (the Company) was incorporated to develop and operate a 'Disneyland-style' theme park in Kent. After falling into financial difficulty, the Company entered into a company voluntary arrangement (CVA) with its creditors.
Challenge
A creditor, Paramount Licensing Inc (the Applicant) challenged the CVA and the supervisor's decision not to terminate it despite irremediable breaches of its terms by the Company including its:
- failure to issue shares to the CVA creditors within twelve months
- disposal of its assets for no consideration without the consent of the supervisor
- ceasing to trade.
The Company issued a cross-application for a stay of the CVA pending the outcome of the Applicant's challenge to the CVA on grounds of unfair prejudice.
Decision
- In dismissing the cross-application, the court stated that a CVA is a statutory contract, not a set of legal proceedings and, as such, it cannot be stayed under the Civil Procedure Rules.
- The court held that the Company was in breach of the terms of the CVA and ordered that a certificate of its termination be issued the following day.
Key takeaways
The court has broad powers to review and rectify decisions or omissions by supervisors. It does not, however, have the power to amend or modify the terms of or to 'stay' a CVA. Supervisors must immediately act upon breaches and, where appropriate, take steps to terminate the CVA and initiate winding-up proceedings.
Find out more
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.
Paramount Licensing Inc. v (1) William Anthony Batty (2) The London Resort Company Holdings Limited [2024] EWHC 3287 (Ch)