Macfarlanes and Burness Paull recently advised Dobbies Garden Centres, the UK’s largest operator of garden centres, on its restructuring plan under Part 26A of the Companies Act 2006, which was approved by Lord Braid in the Court of Session in Scotland on 9 December 2024.

A restructuring plan is a procedure pursuant to which a company in financial difficulty can make a compromise or arrangement with its creditors to eliminate, reduce, prevent, or mitigate the effect of its financial difficulties. Such compromises and arrangements can take a variety of forms, including amendments and extensions of debt, debt for equity swaps and amendments to the terms of, and compromise of rent payable under, leases and other property-related liabilities.

The restructuring plan process was introduced during the COVID-19 pandemic to provide a new restructuring tool in the UK. While there is a great deal of similarity between the regime for restructuring plans and the pre-existing regime for schemes of arrangement under Part 26 of the Companies Act 2006, there are important differences. In particular, restructuring plans can overcome significant opposition to a restructuring from creditors and members as the court has the power to sanction a restructuring plan even where an entire class of creditors or shareholders has voted against the restructuring plan provided an “in the money” class of creditors approves the plan (a so-called "cross-class cram down").

Since its introduction four years ago, around 35 restructuring plans have been proposed across the UK. Prior to the proposal of the Dobbies restructuring plan, however, only one other restructuring plan had been sanctioned in Scotland – the Premier Oil restructuring plan sanctioned in March 2021 – and no written opinion was issued by the Scottish court on this plan. The Dobbies restructuring plan was also the first instance of the Scottish courts sanctioning a plan by implementing a cross-class cram down and the first use of a restructuring plan to compromise property-related liabilities in Scotland.

This note takes a look at some of the key points to consider when proposing a restructuring plan in Scotland. It also considers the other lessons learnt from the Dobbies restructuring plan, in particular the judicial guidance provided in Lord Braid’s judgment on what constitutes a meeting, which will be of relevance to both Scottish and English companies proposing to hold meetings of creditors or members, whether in connection with a restructuring plan or otherwise. 

Why was the Dobbies restructuring plan proposed in Scotland? 

The majority of the liabilities proposed to be amended and/or compromised by the restructuring plan were governed by English law and subject to the exclusive jurisdiction of the English courts. In particular, the vast majority of the leases to be compromised related to properties in England, with just a small number of Scottish leases governed by Scots law proposed to be compromised. 

The Court of Session, however, had sole jurisdiction in relation to the restructuring plan on the basis that the company proposing the plan, Dobbies Garden Centres Limited, is incorporated under the laws of Scotland and, accordingly, it is the Court of Session that has jurisdiction to wind up the plan company pursuant to section 120(1) of the Insolvency Act 1986. Further, the plan company’s centre of main interest is in Scotland as its central affairs are managed at its head office in Scotland. 

Intra-UK recognition of the restructuring plan 

Given the majority of liabilities to be amended/compromised were governed by English law, the Court of Session needed to be satisfied that a Scots law governed restructuring plan would be recognised by the English courts. 

Accordingly, an opinion from independent English counsel was procured confirming that the Dobbies restructuring plan would be effective under English law. This was on the basis that the English court would recognise that the Companies Act 2006, including Part 26A relating to restructuring plans, is a UK Act of Parliament with application to both England and Scotland. An English court would therefore consider a restructuring plan sanctioned by the Court of Session as giving rise to a statutory compromise or arrangement, effective in England in respect of matters subject to or governed by English law. 

The Court of Session accordingly held that no difficulty was anticipated in the restructuring plan being effective in England. 

English case law application 

As more restructuring plans go through the English courts, an evolving body of case law is developing and supplementing the pre-existing extensive body of case law in respect of schemes of arrangement. 

The Scottish courts can, quite properly, be expected to consider restructuring plans from an independent perspective, and there will inevitably be certain differences in their approach compared to the English courts (certainly at least in relation to matters of Scots law which are different to English law – see further below). However, there has been considerable commentary from the Scottish courts that UK statutes, such as the Companies Act 2006, should be interpreted in a homogeneous manner across the UK. In the Dobbies judgment Lord Braid recognised there is a line of authority allowing the Court to draw on English jurisprudence. As such, we can expect decisions in relation to restructuring plans proposed in England to be highly persuasive to the Scottish courts. In considering the Dobbies restructuring plan, the Court of Session was very interested to understand whether there was precedent for various aspects of the proposed plan in English case law. 

Scots law considerations in relation to the plan structure and documentation 

There are of course a number of differences between English and Scots law, in particular in relation to certain common law security unique to Scotland and its ranking on insolvency, and procedural differences. When structuring a restructuring plan compromising or amending liabilities governed by both English and Scots law, such divergences need to be accounted for and reflected in the plan documentation. 

For example, when preparing expert reports in relation to the relevant alternative to the restructuring plan (i.e. whatever the court considers to be most likely to occur in relation to a company if a restructuring plan is not sanctioned) and the outcomes for creditors under the restructuring plan and in the relevant alternative, it is necessary to account for Scots law considerations. This includes, for instance, when compromising leasehold liabilities in Scotland taking into account any landlord’s hypothec – a common law security right in respect of unpaid rent arrears due in the event of the administration or liquidation of their tenant over owned moveables within the premises, which does not exist under English law. Additionally, any procedural requirements relating to expert reports should be factored in (see further below). 

Key procedural difference between restructuring plans proposed in England and Wales, and Scotland

The restructuring plan procedure, which, as noted above, applies across the UK, involves a three-stage process comprising: 

1. A convening hearing at which the court decides whether to summon meetings of the classes of creditors and/or members affected by the proposed restructuring plan and if there are any fundamental obstacles to sanction of the plan. 
2. The meeting of each class of creditors/members being held. 
3. A sanction hearing at which the court may exercise its discretion to sanction the proposed restructuring plan, including whether to exercise its power to implement a cross-class cram down. 

Although this three-stage process is broadly the same for restructuring plans proposed in England and Scotland, there are a number of key procedural differences between the jurisdictions, including: 

• When class composition issues are considered

In England, the Practice Statement (Companies: Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006) (the Practice Statement) confirms that issues relating to class composition should be identified and, if appropriate, resolved at the convening hearing. 

The Practice Statement, issued by the Chancellor of the High Court of England and Wales, does not, however, apply in Scotland. Instead, matters relating to class composition are held over to the sanction hearing. As a result, in Scotland it is arguably considerably more important to ensure that creditor classes have been properly constituted at the outset of proposing a restructuring plan, as there is a greater risk that at the final sanction hearing stage the court determines that there has been an error in class composition and that the proper class meetings have not be held (resulting in considerable waste of time and expense). 

• No formal requirement to issue a practice statement letter in Scotland 

Given the Practice Statement is not applicable in Scotland, there was no formal requirement to issue a practice statement letter to Dobbies’ creditors as would be the case for a plan proposed in England. However, in order to provide adequate notice to the plan creditors affected by the plan, a practice statement letter was issued to such creditors anyway, which considered the requirements under the Practice Statement in order to make it as informative and as useful to the plan creditors as possible. The decision as to whether or not to issue a practice statement letter in a Scottish restructuring plan will be a matter to consider in each particular case accounting for the specific facts and circumstances applicable. 

• Civil Procedure Rules do not apply 

The Civil Procedure Rules (CPR) Part 35 do not apply in Scotland. Scotland is reliant on its own rules of court procedure and applicable common law principles. This is a point of particular relevance in relation to expert reports which, in English proceedings, are required to be prepared in accordance with the CPR. Whilst the duties owed by experts as a matter of Scots law are broadly aligned with the requirements of the CPR, it will be important to ensure that, in any Scottish proceedings, the requirements of expert reports as a matter of Scots law are adequately addressed.

• Role of the Court Reporter

At the convening hearing, the Court of Session appointed a Court Reporter. The Court Reporter, who is a qualified solicitor, is an independent person who owes their duties to the court. 

The reporter’s role is to review the restructuring plan documentation and to report to the court on the facts and circumstances relating to the restructuring plan, submitting a report to the court ahead of the sanction hearing. The Court Reporter is required to be provided with such information and documentation as they require to undertake their remit. 

The report of the Court Reporter will usually explain whether there is any reason why the court should not sanction the restructuring plan. However, the views of the Court Reporter as outlined in their report are not binding on the court and the court retains discretion as to what orders to make.

• Timetable considerations 

Orders for advertisement (which includes both notices of creditor meetings and of any other orders made regarding notice of period for answers, discussed below) generally are to be advertised in the Edinburgh Gazette and at least one main newspaper. The publication deadlines and publication dates need to be factored into a restructuring plan’s timetable in Scotland.

There are a number of additional procedural steps which must be taken in Scotland compared to England, which impact on the timetable for any Scottish restructuring plan. In particular: 

• After the meetings of creditors have taken place, there is a need in Scotland to go back to the court by way of motion to seek a further order, to give notice of the petition seeking sanction of the restructuring plan to interested parties and to set a period for any “answers” (i.e. a formal court document objecting to the restructuring plan or requesting to appear at any court hearings) to be lodged. The grant of this order is usually dealt with on the papers and there is usually no need for a hearing, but additional time should be factored in for such an order to be obtained and the timetable may need to be adjusted if further procedure is required. 
• The usual period for answers is 21 days from service, intimation and advertisement. It may be possible, at the court’s discretion, to reduce the period for answers, and this period is often reduced to 14 days in schemes of arrangement (and was so reduced in the case of Dobbies’ restructuring plan). Whether or not this is likely to be granted in the context of a restructuring plan will depend on a number of factors, including the nature of the plan creditors involved and the extent to which wider pressures may be influencing the timetable. It should also be noted that if creditors outside of Europe are to receive intimation, an extended notice period will apply. If answers are lodged, there is a prospect that further procedure may be required ahead of the sanction hearing which may also affect the timetable. 
• The Court Reporter is not bound to a particular timetable for submitting their report but usually there would be an ongoing dialogue with the Court Reporter such that any impact on the wider timetable can be managed. Lord Braid provided some helpful guidance on interactions with a Court Reporter in the Dobbies judgment. 
• It is possible to request where appropriate/necessary consent of the court to approve an adjusted timetable. However, ultimately, any request is subject to the court’s discretion.

What is a meeting? 

The question as to what a meeting is, and whether it requires the coming together of at least two persons, has been a point of law which has given rise to a degree of uncertainty in decisions regarding certain English schemes of arrangement and restructuring plans. Lord Braid’s judgment in respect of the Dobbies restructuring plan offers some helpful guidance on this question. 

In the context of the Dobbies restructuring plan, the question became relevant for two reasons: (i) a meeting of one of the classes of landlord creditors was only attended by one landlord; and (ii) the only person that attended the meeting of the secured creditors - the only class of creditors to approve the restructuring plan - was the chairperson holding proxies for all of the secured creditors.

In his Lordship’s judgment, citing Re Attitude Scaffolding Ltd [2006] EWHC 1401 (Ch), Lord Braid noted that the preponderance of English authority is that a meeting requires the coming together of two or more persons. Lord Braid also cited Re Listrac Midco Ltd & Ors [2023] EWHC 78 (Ch), in which it was held that a meeting attended by only one creditor was not a meeting in the “strict” sense, but that it was not necessary for a qualifying meeting of a dissenting creditor class to be held in order for the court to cram down that class. In Chaptre Finance Plc, Re | [2023] EWHC 1665 (Ch), it was observed a meeting of one creditor would be defective and fatal to a scheme of arrangement, but that even if it was technically defective, the class could still be crammed down under a restructuring plan. In relation to the “meeting” of one landlord creditor in the Dobbies restructuring plan, Lord Braid took this approach, finding that even if the meeting of that class of landlords was technically defective (on which he expressed no concluded view) it makes no difference – it was a dissenting class whether by non-approval or by virtue of not being an assenting class and could therefore be subject to cross-class cram down.

The question of whether the meeting of secured creditors had been held was of more significance. If it had not, the resolution purportedly passed at the meeting of secured creditors would be of no effect and the court would not be able to exercise its cross-class cram down power as no class of creditors would have voted in favour of the restructuring plan by the requisite majority.

Section 901G of the Companies Act 2006 provides for the circumstances in which a cross class cramdown can be applied by the court. One of the conditions to its application is that: 

the compromise or arrangement has been agreed by a number representing 75% in value of a class of creditors or (as the case may be) of members, present and voting either in person or by proxy at the meeting summoned … who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative.

In the case of Revolution Bars Ltd [2024] EWHC 2949 (Ch) (relating also to a restructuring plan and the judgment of which was published around a week prior to the sanction hearing for Dobbies’ restructuring plan), Richard J had held that it was ‘at least arguable’ that certain creditors had not approved the plan at ‘meetings’ since only one person was physically present at each apparent ‘meeting’ even though the chair held proxies issued by different creditors in each case. Richards J then proceeded on the basis that those classes of creditor were dissenting classes. In that case, however, there were other assenting classes such that the Court could proceed to sanction the restructuring plan on the basis of a cross-class cram down. Lord Braid, however, noted that he did not have that luxury given the only assenting class to the Dobbies restructuring plan was that of the secured creditors. 

Lord Braid did not agree with the comments made on this point by Richards J in Revolution Bars. Instead, Lord Braid held this was ultimately a question of statutory interpretation and there was nothing to suggest that a meeting required two or more natural persons to physically come together. Indeed, section 901G provides for creditors or members to vote either in person or by proxy. It would, Lord Braid held, make no sense that a creditor be present in a physical sense, but vote by proxy, the very purpose of a proxy being to exercise all of the rights of a creditor to attend, speak and vote at the meeting. Even allowing that a meeting requires the coming together of two or more persons, for the purposes of section 901G that can be achieved by two or more creditors being represented by proxy. The requirement (if there is such a requirement) that two or more creditors must participate in order for there to be a meeting is satisfied by the appointment, by two or more creditors, of a proxy who is in attendance. The section does not require that at least two different proxies must be so appointed. That, Lord Braid found, would be illogical and, indeed, unworkable in practice. 

Although not binding on the English courts, Lord Braid’s judgment provides some helpful judicial guidance that a meeting of a class of creditors approving a restructuring plan can be validly held where only a single person holding a proxy for multiple parties is in attendance. 

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This article was co-written with representatives from Burness Paull including Allana Sweeney, Gary Moffat and Fiona Carlin.