The restructuring plan is a procedure under the UK Companies Act, which companies can use to bind dissenting creditors both secured and unsecured, and even across classes.

To make the restructuring plan viable and legal, you have to demonstrate that the dissenting parties are no worse off under the plan versus the relevant alternative. For example, if the relevant alternative is a liquidation and under the proposed plan, all parties would recover the same or more proceeds than the liquidation scenario, then the plan would be approved and would be binding to everyone, including holdouts. Proposals may be launched by any party, including creditors and shareholders, but in practice, it's the company itself and its directors who typically will propose a plan.

Stakeholders are grouped into classes for the voting process. At least 75% of votes by value for each class of stakeholder is required for approval outta the money classes, which means those who would lose everything and get nothing back may not even be required to vote in certain cases, such as in the Smile Telecom Plan, which was approved in March 2022. Under a restructuring plan, the company continues to operate with directors remaining in control and without protection for any length of time against creditors claims Restructuring Plan example, Virgin Active 2021. This is a successful example of a restructuring plan being used to implement a non-consensual deal. Virgin Active operates gyms across Europe, Asia Pacific, and had its finances significantly impacted by Covid 19 restrictions.

The company sought to restructure its liabilities using a restructuring plan and produced a proposal whereby creditors were split into seven different classes. Despite most of the credit classes having voted against the proposed plan, two key classes secured lenders and Class A landlords voted overwhelmingly in favor. The evidence presented to the court showed that the value would break in the secured debt under the relevant alternative scenario, which was an administration process. Therefore, unsecured creditors were out of the money such that none of the landlords or other unsecured creditors would receive any return saved for in respect of the prescribed part. This meant that despite not every class voting for the plan, it was in fact approved by the courts. Ultimately, the court approved the proposed plan as all creditors expected to receive more proceeds than in the alternate administration process.