Part 26A Restructuring Plans driving consensual restructuring, research finds

Research from The Institute for Turnaround (The IFT) found that Part 26A Restructuring Plans were being considered in increasing numbers of cases and were often successful in encouraging consensual agreement.

 Further development of case law and market practice would help more SME firms take advantage of this tool.

 Part 26A Restructuring Plans, introduced under the Corporate Insolvency and Governance Act 2020 represent a powerful company-side, non-insolvency tool for businesses that may be experiencing financial distress due to successive global and economic pressures.

The IFT is strongly supportive of the potential for Restructuring Plans to help drive improved future financial performance to avoid unnecessary insolvencies.

In the first quarter of 2024 The IFT conducted a series of regional roundtable meetings in bringing together IFT independent members, lenders, alternative lenders, investors, lawyers, advisers and statutory and other key stakeholders.  The roundtables investigated a mixture of experiences with and views on Restructuring Plans and were supplemented with a follow-up survey to participants.

Survey respondents indicated gathering pace in the number of companies considering or proposing a Restructuring Plan to achieve the survival of a business:  51% in the past 6 months compared to 24% in the past 12 months and 12% in the past 18 months. These had been in a wide range of sectors, with the top three being retail, manufacturing, and casual dining.

Restructuring Plans had also been considered for companies of a range of sizes, with 22% of respondents considering for companies with a turnover of less than £25 million, whilst 52% had considered for companies with turnovers between £25 and £100 million or £100 million plus turnover.

41% of respondents had discussed the possibility of applying for sanction of a Restructuring Plan in negotiations for a restructuring of a business. Of those that had specifically discussed the possibility of a Restructuring Plan as part of negotiations, 70% indicated that this had helped achieve a consensual agreement. This demonstrates positive outcomes for both a company and its creditors and stakeholders. A clear message from the roundtables was also that the value that can be preserved and generated using a Restructuring Plan was substantial, as well as potentially speeding up the delivery of a turnaround.

The IFT is committed to engaging with market and other stakeholders to encourage solutions to such practical issues, recognising that the recent Court of Appeal judgment in the case of Adler helps provide clear guidelines for businesses of all sizes in relation to Restructuring Plans.

Milly Camley, CEO of The IFT said, “Part 26A Restructuring Plans are now coming of age with the Adler judgment which provides helpful guidance for businesses and stakeholders. The IFT is working with a range of stakeholders to seek to encourage engagement and development of market practice so that the full range of businesses can benefit and thrive. The roundtable discussions also highlighted the important role that IFT members can play in supporting the use of Restructuring Plans and helping to engage with stakeholders”.

You can read the report HERE and the survey findings HERE.