The Conceptual Foundation of Cross-Class Cramdown

Abstract

This paper is concerned with 'cramdown' in corporate restructuring, in which a plan that impairs the rights of creditors or shareholders against a company is coercively imposed on those who have voted against it by court order. I analyse the development of cramdown in the UK, from cramdown on a dissenting minority, to the introduction of a somewhat thin statutory power to impose a plan on an entire dissenting class (so-called cross-class cramdown). I suggest that the early efforts of judges to put flesh on the bones of the power using real facts have revealed some incorrect assumptions that most scholars, practitioners and policy makers made about the conceptual foundation of cross-class cramdown and offer some suggestions for a course correction. The paper suggests new ways to think about cross-class cramdown normatively and theoretically, and important insights into the process of law reform in complex, modern markets.

Keywords: restructuring, reorganization, reorganisation, bankruptcy, insolvency, Part 26A, schemes of arrangement, company voluntary arrangement, CVA, Chapter 11, Corporate Insolvency and Governance Act 2020