Judicial Discretion in Part 26A Restructuring Plan Procedures

Abstract

For the last decade or so, schemes of arrangement have been the principal UK legal tool for restructuring large corporates. Two important nineteenth century appeal court decisions concluded that the court has discretion as to whether to sanction a scheme once the statutory conditions for sanction have been met, but also set out clear guidelines for exercise of this discretion which courts still follow today. The Corporate Insolvency and Governance Act 2020 introduced a new restructuring plan procedure into UK law, closely modelled on schemes of arrangement but with significant differences. The Explanatory Notes to the Act state that the court has discretion as to whether to sanction a restructuring plan once the statutory conditions have been met but offer limited, further guidance. Suggestions have been made by commentators, scholars, and judges but, it is suggested, none of them provides a complete frame of reference. Thus, this article seeks to fill the gap through an examination of the principles in the legislation, and the principles in scheme cases. The frame of reference which emerges suggests the potential for costly sanction hearings with significant evidential burdens. However, the article concludes that this may not be as problematic as may, at first, appear.

Keywords: corporate restructuring, corporate reorganization, corporate reorganisation, corporate insolvency, scheme of arrangement, restructuring plans, judicial discretion

JEL Classification: K22