Glitches and class meetings in English schemes

By Negeen Arasteh

Where different, equally ranking unsecured noteholders had no realistic prospect of obtaining any return on the alternative scenario of an insolvency, they had a common interest and could vote as a single class. Where proposed modifications were discrete, could be efficiently described in plain language and did not introduce additional class problems, they could be approved to rectify a ‘glitch’.

There were several hearings on a scheme of arrangement (the ‘Scheme’) proposed by the Co-operative Bank Plc (the ‘Bank’) pursuant to section 896 of the Companies Act 2006, which related to seven series of subordinated debt securities (the ‘Notes’) of approximately £937m.

The first question was whether separate class meetings are required for groups of creditors holding the Notes that all differed in the detail of their terms and conditions. The second question was whether to approve a modification of the Scheme for the Bank to correct a ‘glitch’ in the Scheme, which meant that Scheme creditors with smaller holdings of the Notes were able to acquire a disproportionate number of shares at a discount…

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