R&I Update - June 2023 – 1 / 4 观点
The English tax authority, HMRC, has successfully challenged the restructuring plans put forward by The Great Annual Savings Company Limited (GAS) and Nasmyth Group Limited (Nasmyth).
This is the first time that HMRC has actively challenged restructuring plans at the sanction hearing. The key takeaways from the judgments:
The court refused to authorise the Nasmyth restructuring plan, despite the conditions for cross-class cram down being met, because it was unfair. The court considered the size of the HMRC debt, its part preferential status (see our alert), the long overdue and large sum owed by the group as a whole and HMRC’s "tiny" share of the restructuring surplus.
The tipping point for the court's refusal was the “roadblock” preventing the plan from taking effect, namely, that it depended on HMRC agreement to entering into “time to pay” agreements with Nasmyth's subsidiaries and this had not been obtained.
This is the first case where a restructuring plan has been refused purely as a matter of the court's discretion.
The GAS plan failed to satisfy the “no worse off“ test for cross-class cram down because GAS had not proved that HMRC would be better off under the plan than in the "relevant alternative" of administration. In particular, the court found that GAS's valuation evidence of its largest asset, its debtor book, was not persuasive.
Even if this had been proved, the court would have refused to sanction the plan as there was not a fair distribution of the benefits generated by the restructuring.
The court is prepared to cram down HMRC and has done so once before (see our alert), but it will 'exercise caution' in relation to HMRC debts and will not cram down unless there are 'good reasons' to do so.
It is not always necessary for an objector to put forward expert evidence to challenge the figures suggested by the proposer of a plan.
Valuation experts should carry out independent analyses when relying on information provided by a plan company.
Critical creditors (which get paid in full) must be truly essential to the future operation of the plan company.
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.
Re The Great Annual Savings Company Limited  EWHC 1141 (Ch)
Re Nasmyth Group Limited  EWHC 988 (Ch)