TRW & Co · Banking, finance and restructuring
Restructuring Plans under Part 26A: Cross-Class Cram Down Explained
A restructuring plan Part 26A process lets a company in financial difficulty compromise with creditors class by class and ask the court to impose the plan on dissenting classes. Cram down needs the no-worse-off test and one in-the-money assenting class, but since recent Court of Appeal rulings, how the plan shares its benefits now decides contested cases.
Key pointAfter Petrofac, new money returns above market rates count as restructuring benefit whose allocation the plan company must justify with cogent evidence, or sanction may be refused.
At a glance
Introduced in 2020
The Corporate Insolvency and Governance Act 2020 inserted Part 26A into the Companies Act 2006, creating restructuring plans with cross-class cram down.
75% by value
A class approves the plan if 75% in value of those present and voting agree; unlike a Part 26 scheme, no majority in number is needed.
Two cram-down conditions
No member of a dissenting class may be worse off than in the relevant alternative, and an in-the-money class must have approved by 75% in value.
Fairness now central
Adler, Thames Water and Petrofac require the court to examine how restructuring benefits are shared, with departures from the relevant alternative justified.
New Practice Statement
A revised Practice Statement applies to applications for meetings orders heard at convening hearings listed on or after 1 January 2026.
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The short answer: what a restructuring plan Part 26A process does
A restructuring plan Part 26A process lets a company in financial difficulty propose a compromise with its creditors or members, vote on it in classes, and ask the court to sanction it. Its defining feature is cross-class cram down: the court can impose the plan on a dissenting class if no member of that class would be worse off than in the "relevant alternative" and at least one class with a genuine economic interest has voted in favour.
Meeting those statutory conditions is necessary but not enough. Since 2024 the Court of Appeal has made clear that the court must also be satisfied that the plan fairly allocates the benefits of the restructuring between creditor groups. That fairness question, rather than the statutory tests, is now where most contested plans are won or lost.
This guide explains how plans work, the two cram-down conditions, how recent appellate decisions have changed the fairness analysis, and what companies and creditors should do in practice.
The legal framework
Restructuring plans were introduced by the Corporate Insolvency and Governance Act 2020, which inserted Part 26A into the Companies Act 2006. They sit alongside, and borrow heavily from, the older scheme of arrangement under Part 26.
Under section 901A, Part 26A applies only where two conditions are met. Condition A is that the company has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern. Condition B is that a compromise or arrangement is proposed with creditors or members (or a class of them) whose purpose is to eliminate, reduce or prevent, or mitigate the effect of, those financial difficulties.
Key features of the restructuring plan Part 26A regime include:
- Class voting by value. A class approves the plan if 75% in value of those present and voting agree. Unlike a Part 26 scheme, there is no requirement for a majority in number.
- Exclusion of out-of-the-money classes. Under section 901C(4) the court may exclude a class from voting if it is satisfied that none of its members has a genuine economic interest in the company.
- Cross-class cram down. Section 901G allows the court to sanction a plan despite a dissenting class if Conditions A and B are met.
- Discretion. Even if every condition is satisfied, sanction remains discretionary.
Plans are available to companies liable to be wound up under the Insolvency Act 1986, which includes many foreign companies with a sufficient connection to England and Wales. There is no automatic moratorium, but a plan can be combined with a Part A1 moratorium or proposed by an administrator or liquidator.
The cross-class cram down conditions
Section 901G sets out two conditions for cram down. The court must be satisfied of both before it can consider whether to exercise its discretion.
| Condition | What the statute requires | How it is tested in practice |
|---|---|---|
| Condition A: no worse off | None of the members of the dissenting class would be any worse off under the plan than in the relevant alternative | Valuation evidence comparing each creditor's likely return under the plan with the most likely outcome if the plan fails |
| Relevant alternative | Whatever the court considers would be most likely to occur if the plan is not sanctioned | Usually administration or liquidation, sometimes a different restructuring; supported by evidence of liquidity runway and options |
| Condition B: in-the-money approval | At least 75% in value of a class that would receive a payment, or has a genuine economic interest, in the relevant alternative has voted for the plan | Identifying at least one assenting class that is in the money in the relevant alternative |
| Discretion and fairness | Not in the statute; derived from case law | Horizontal comparison of how plan benefits are shared between classes, with departures from the relevant alternative requiring justification |
The no-worse-off test
Condition A is a vertical comparison: for each member of a dissenting class, would it be worse off under the plan than in the relevant alternative? In Petrofac the Court of Appeal confirmed that the test compares the value of creditors' existing rights in the relevant alternative with the value of the rights they receive under the plan. Wider commercial consequences, such as losing a competitive advantage, fall outside it.
The relevant alternative
The relevant alternative is often the battleground. Plan companies typically argue that, without the plan, they would enter administration or liquidation with poor returns for unsecured creditors. Dissenting creditors may argue that a better consensual deal or a different restructuring was realistically available. The court decides on the evidence, which usually includes expert valuation and evidence about liquidity.
Fairness after the Court of Appeal decisions
Three Court of Appeal decisions have reshaped how the court approaches discretion in a contested restructuring plan Part 26A case.
Adler (2024)
In Re AGPS Bondco plc [2024] EWCA Civ 24, the Court of Appeal allowed an appeal against the sanction of the Adler group's plan. It held that the court must consider whether the plan fairly allocates the benefits of the restructuring, and that departing from the pari passu ranking creditors would have in the relevant alternative requires a proper justification.
Thames Water (2025)
In Kington S.à.r.l. v Thames Water Utilities Holdings Ltd [2025] EWCA Civ 475, the court upheld an interim plan, subject to an amendment. It explained that the no-worse-off comparison is necessary but not sufficient for cram down, that the court must ask how the benefits preserved or generated by the plan are shared, and that out-of-the-money creditors' treatment is not irrelevant even if their individual objections may carry limited weight. Buying time for a further restructuring could itself be a relevant benefit.
Petrofac (2025)
In Saipem S.p.A. v Petrofac Ltd [2025] EWCA Civ 821, decided on 1 July 2025, the Court of Appeal set aside the sanction of the Petrofac plans. New money providers were to receive the large majority of post-restructuring equity. The court accepted that new money can expect priority repayment and a market-rate return, but held that returns beyond that are a restructuring benefit whose allocation must be justified with cogent evidence. With no market evidence or justification, the court declined to sanction.
After Petrofac, the plan company carries the practical burden of explaining, with evidence, why each group receives what it gets from the restructuring.
What has changed in practice
- Plan companies must evidence how the restructuring benefits are generated and why each group's share is fair.
- Out-of-the-money creditors are not automatically disregarded; meaningful participation for them strengthens a plan.
- New money terms should be market-tested, or supported by evidence of a process or of market rates.
- Dissenting creditors have more room to challenge allocation, not just valuation.
Later first-instance decisions, including landlord cram-down cases, have applied this approach, emphasising evidence that justifies differential treatment.
The process step by step
The court's revised Practice Statement on Part 26 and Part 26A applies to applications for a meetings order heard at convening hearings listed on or after 1 January 2026. It sets out what the court expects at each stage.
- Design and negotiation. The company and its advisers develop the plan, identify the relevant alternative, obtain valuation evidence and negotiate with key creditor groups, often through lock-up agreements.
- Practice statement letter. Affected creditors and members are notified of the proposed plan, the proposed classes and the convening hearing, so that issues can be raised early.
- Convening hearing. The court considers class composition, any application to exclude a class with no genuine economic interest, and directions for meetings. It does not decide on the merits of the plan at this stage.
- Explanatory statement and meetings. The company circulates an explanatory statement explaining the plan's effect, then holds class meetings at which creditors and members vote.
- Sanction hearing. The court decides whether the statutory requirements are met, whether cram down conditions are satisfied for any dissenting class, and whether to exercise its discretion. Opposing creditors may file evidence and appear.
- Implementation and recognition. Once sanctioned and filed at Companies House, the plan binds the affected parties. Recognition may be sought abroad where assets or creditors are located outside the UK.
Prepare the fairness case as carefully as the valuation. If one group, such as new money providers or senior lenders, receives a disproportionate share of the upside, assemble evidence of the market terms, the process used to source new money, and why the allocation is justified before the convening hearing, not after objections are filed.
How plans compare with other tools
A restructuring plan Part 26A route is not always the best option. Schemes of arrangement under Part 26 remain useful where no cram down is needed. Company voluntary arrangements are cheaper and do not require court sanction but cannot bind secured or preferential creditors without consent. Administration delivers a moratorium and a sale but usually ends the company's existing form. See our guides to CVAs and administration vs liquidation.
Plans have been used for large capital-structure restructurings, for landlord compromises in retail and hospitality, and increasingly by mid-market companies, although cost and evidential burden remain barriers for smaller businesses. For a smaller company, the question is whether the benefit of binding a dissenting class justifies the cost of a restructuring plan Part 26A application, including expert valuation evidence and two court hearings.
An illustrative scenario
Illustrative only; the parties are generic. A UK holding company with secured bank debt, unsecured bonds and trade creditors faces a liquidity shortfall. It proposes a restructuring plan Part 26A in which secured lenders extend maturities, bondholders swap debt for equity, and a group of investors provides new money in return for a substantial equity stake. The bondholder class votes against.
The company's evidence shows that in the relevant alternative, an administration, bondholders would recover little. Condition A appears satisfied, and the secured lender class, which is in the money, voted in favour. But following Petrofac, the court will also ask whether the new money providers' equity share is justified. The company strengthens its position by showing that it ran a competitive process for new money, obtaining expert evidence on market terms, and offering bondholders a meaningful share of the upside.
Risks and common mistakes
Treating the no-worse-off test as the whole case
Satisfying Condition A only opens the door to cram down. The Court of Appeal has made clear that the court must also consider how the benefits of the restructuring are allocated between classes. A plan that leaves dissenting creditors marginally better off than in administration, while giving most of the upside to another group without justification, risks refusal. Build the fairness case from the outset and explain each departure from the relevant alternative's distribution.
Weak evidence on the relevant alternative
The relevant alternative is what the court considers most likely to happen if the plan fails. Assertions are not enough; the court expects evidence on liquidity, financing options and likely insolvency outcomes, usually from independent experts. Dissenting creditors increasingly commission their own valuations. Where the company's evidence is thin or the alternatives were not properly explored, a challenge on the relevant alternative becomes much more likely to succeed.
Getting class composition wrong
Creditors should be placed in the same class only if their rights are not so dissimilar that they cannot sensibly consult together. Over-fragmenting classes can look like an attempt to manufacture an assenting class; lumping together creditors with different rights can lead to a challenge. Raise class issues in the practice statement letter so they can be resolved at the convening hearing.
For creditors: engaging too late
Creditors who intend to oppose a plan should engage early, instruct valuation experts and raise objections at the convening stage where possible. The timetable between the practice statement letter and sanction is typically tight. Waiting until the sanction hearing to challenge class composition or the relevant alternative reduces the chance of success and may affect costs.
Cross-border use
Plans are frequently used by foreign groups with English-law debt, relying on a sufficient connection with England and Wales. Since the UK left the EU, recognition in EU member states depends on local law and private international law rather than automatic EU regimes, and US recognition is commonly sought under Chapter 15. Plan companies should take local advice on recognition wherever significant assets or dissenting creditors are located.
For groups with operations in Bangladesh or South Asia, the interaction between an English plan and local creditor rights needs careful analysis. TRW & Co's London and Dhaka teams can coordinate that work; see our UK–Bangladesh disputes page.
What to do next
- Test whether the restructuring plan Part 26A conditions in section 901A are met.
- Commission early, independent evidence on the relevant alternative.
- Design classes carefully and consult key creditor groups.
- Prepare a fairness justification for the allocation of benefits, including any new money terms.
- Plan for recognition in other jurisdictions.
- For creditors: instruct advisers early and engage at the convening stage.
Whether you are a company proposing a plan or a creditor facing one, we can help; where advocacy in the higher courts is required, we instruct specialist counsel. Contact our London office or see our restructuring and insolvency practice and our contentious insolvency team.
Frequently asked questions
01What is a restructuring plan under Part 26A?
It is a court-supervised procedure, introduced by the Corporate Insolvency and Governance Act 2020, that allows a company facing financial difficulties to propose a compromise or arrangement with its creditors or members. Affected parties vote in classes, and the court is asked to sanction the plan. Its distinctive feature is cross-class cram down, which allows the court to bind a dissenting class if statutory conditions are met and it considers sanction fair. Once sanctioned, the plan binds all affected parties, including those who voted against.
02What is cross-class cram down?
Cross-class cram down allows the court to sanction a restructuring plan even though one or more classes voted against it. Under section 901G of the Companies Act 2006, the court must be satisfied that no member of the dissenting class would be worse off than in the relevant alternative (Condition A), and that the plan was approved by 75% in value of a class that would receive a payment or has a genuine economic interest in the relevant alternative (Condition B). The court then decides whether to exercise its discretion.
03What is the relevant alternative?
The relevant alternative is whatever the court considers would be most likely to occur in relation to the company if the plan were not sanctioned. In many cases it is administration or liquidation, but it may be a different restructuring or a sale. It matters because it is the benchmark for the no-worse-off test and for identifying which classes are in the money. The court decides on the evidence, usually including expert valuation and evidence about the company's liquidity.
04How did the Petrofac decision change restructuring plans?
In Saipem v Petrofac [2025] EWCA Civ 821 the Court of Appeal set aside sanction of the Petrofac plans. It confirmed that the no-worse-off test compares the value of creditors' rights and excludes wider commercial effects. But it held that the allocation of post-restructuring equity to new money providers had not been justified: returns above a market rate are a restructuring benefit whose fair allocation requires cogent evidence. Plan companies now need to evidence and justify how benefits are shared.
05How is a restructuring plan different from a scheme of arrangement?
Both are court-sanctioned compromises under the Companies Act 2006, but a Part 26A plan is available only where the company has encountered or is likely to encounter financial difficulties. A plan requires 75% by value in each voting class without a majority-in-number test, allows classes with no genuine economic interest to be excluded, and permits cross-class cram down. A Part 26 scheme requires a majority in number as well as 75% by value, and every class must approve.
06Can a foreign company use a UK restructuring plan?
Yes, if it is liable to be wound up under the Insolvency Act 1986 and has a sufficient connection with England and Wales, for example English-law-governed debt. Foreign groups commonly use plans for that reason. However, the plan's effect abroad depends on recognition under local law, and since the UK left the EU there is no automatic EU-wide recognition. Companies typically take local advice and may seek recognition in key jurisdictions, such as under Chapter 15 in the United States.
Sources and official materials
- Companies Act 2006, Part 26A — Statutory framework for restructuring plans, including sections 901A to 901G
- Corporate Insolvency and Governance Act 2020 — Act that introduced Part 26A and the Part A1 moratorium
- Re AGPS Bondco plc [2024] EWCA Civ 24 — Court of Appeal judgment in Adler on fairness and pari passu treatment
- Kington S.à.r.l. v Thames Water Utilities Holdings Ltd [2025] EWCA Civ 475 — Court of Appeal on discretion and allocation of plan benefits
- Saipem S.p.A. v Petrofac Ltd [2025] EWCA Civ 821 — Court of Appeal on no-worse-off test and new money allocation
- Practice Statement: Parts 26 and 26A Companies Act 2006 (September 2025) — Court procedure for schemes and restructuring plans
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.