by Joe O'Malley , Jeremy Erwin October-12-2023 in Commercial & Business, Construction
The High Court yesterday ordered that Mac Interiors Limited is to be wound-up, with the loss of some 31 jobs. A proposal for the rescue of Mac Interiors (the “Scheme”) was unsuccessful.
In the course of the hearing to consider the Scheme, the High Court was satisfied:
- that the rescue proposal was in the best interests of the creditors;
- that it treated creditors with common interest in the same class equally;
- that it was fair and equitable, and not unfairly prejudicial to the interest of any interested party;
- the proposal had a reasonable prospect of facilitating the survival of the Company, either as a whole or a part as a going concern; and
- the confirmation of the rescue proposal would be consistent with the policy of the preservation of enterprise and employment.
Despite all of those factors being in play, the Scheme was refused by the Court.
Revenue had objected to the Scheme on the basis that one of the classes of creditors had been improperly formed and that was a “material irregularity” for the purposes of the Companies Act 2014. Only one class of creditors voted in favour of the Scheme, and it was the class that was found to have been improperly formed. The difficulty for the Court was that there was no material difference between this contested class of creditors and the general body of unsecured creditors.
The reason given for the formation of the contested class (called Retained Project Creditors) was that some members of that class were likely to have further involvement with the Company if the Scheme was successful, even though the terms and dividend they would receive was precisely the same as the unsecured creditor class.
The Court said that the only difference between those two classes was in the degree of hope entertained by the trade suppliers, and this level of uncertainty is unsafe to establish a stand alone class of creditors.
It is unfortunate that the Scheme was not approved, given that the Company had a reasonable prospect of survival and for the preservation of the remaining work force. However, in considering a rescue proposal, the Court must be satisfied that the scheme complies with the applicable statutory frameworks, including in its treatment of creditors.
We intend to publish a detailed note shortly.
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About the Authors
Joe O'Malley
Joe is Managing Partner and Head of the Commercial Litigation & Dispute Resolution team at Hayes solicitors. He handles a wide variety of commercial disputes involving high value claims, complex issues and voluminous data for financial institutions and corporate clients.
Jeremy Erwin
Jeremy specialises in insolvency, commercial litigation and dispute resolution, acting for a variety of companies and financial institutions in contract law cases, enforcement and recovery actions and in high value complex Commercial Court proceedings. Jeremy also specialises in intellectual property matters, including advising on registration and protection of trade marks and related rights and on trade mark disputes.