Factual and Procedural Background
The petitioner (Company A) and its group are engaged in exploration for and recovery of oil and gas on the UK Continental Shelf. Company A petitioned the court under Part 26A of the Companies Act 2006 to sanction a restructuring plan ("the Plan") that would compromise debts owed to: (i) creditors under a guarantee of secured bonds issued by Company E (referred to in the opinion as the WEF Bondholders, here "Bondholders A"); (ii) creditors under two super senior bond issues (the Super Senior Bondholders, here "Bondholders B"); and (iii) HM Revenue and Customs (here "Company H") in respect of the Energy Profits Levy (EPL), with aggregate liability to Company H estimated to exceed US$85.25m. Other creditor classes identified included advisers' costs, intra-group debts and joint venture partners' contingent decommissioning liabilities.
Two related group companies (Company B and Company C) entered administration in June 2024. A sale process produced no offers. Proceedings for sanction of a related scheme were commenced in the High Court in London by Company D and were refused by Judge Hildyard ([2025] EWHC 2181 (Ch)). Subsequently, an offer from a subsidiary of Company F to acquire certain group companies (excluding Company C and Company E) was agreed, subject to full and final settlement of material third-party claims. A sale and purchase agreement (SPA) was entered into conditional, inter alia, on court sanction of restructuring plans in both England and Scotland.
The Plan for Company A addresses only debts to Bondholders A, Bondholders B and Company H; releases securities held by Bondholders A and Bondholders B; discharges liabilities under the WEF Bonds and discharges Company H's EPL liability in full; and provides for payments to trustees for Bondholders A and Bondholders B and to Company H out of the SPA consideration according to an approved methodology.
The petition was lodged on 12 February 2026. At the convening hearing on 16 February 2026 the court ordered meetings of three classes of creditors, regulated the meetings, appointed Attorney Moore as reporter and fixed a Sanction Hearing. The reporter certified the petition and proceedings as regular on 30 April 2026. Meetings of Bondholders B and Bondholders A approved the Plan (unanimous and 98.3% respectively), while Company H rejected it. In parallel English sanction proceedings before Judge Green (15–17 April 2026) sanction was granted in relation to Company D. Company H withdrew its opposition in the Scottish proceedings after Judge Green's decision; no evidence was led before Judge Lake and shortened submissions were made.
Legal Issues Presented
- Whether section 901G of the Companies Act 2006 permits a court to sanction a restructuring plan that "crams down" debts owed to Company H.
- How Condition A in section 901G(3) (the "no worse off" test) should be applied — specifically whether the comparison should consider only receipts in respect of the EPL or the overall net recoveries to the Exchequer.
- Whether the Plan is fair between the various stakeholders and thus appropriate for sanction under section 901F given a dissent by Company H.
Arguments of the Parties
Company H's Arguments
- Company H initially contended that section 901G did not confer power to cram down debts owed to it and that the court should not sanction a plan that binds Company H against its will.
- Company H argued that, for Condition A, the comparison should account for overall net recoveries to the Exchequer (including post-transaction tax loss utilisation by purchasers) rather than only receipts in respect of the EPL.
- Company H submitted that other creditors had priced lending risk and that under the Plan Company H would bear a disproportionately large contribution relative to its recovery, effectively extinguishing EPL liabilities while third parties obtained tax losses.
Bondholders' and Other Creditors' Position
- Bondholders A and Bondholders B supported the Plan and approved it at the creditor meetings.
- It was submitted that the Plan reflected the only realistic deal available to realise value for creditors and that fairness should be assessed against that commercial compromise negotiated by stakeholders other than Company H.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Re Nasmyth Group Limited [2023] EWHC 988 (Ch) |
Approach that the court should not as a matter of principle refuse sanction because Company H will be crammed down; requires careful scrutiny where Company H is an involuntary creditor. |
Judge Green's adoption of Leech J's approach (as summarised in this precedent) was accepted and adopted by Judge Lake to support the proposition that debts to Company H can be crammed down subject to careful scrutiny. |
| Petrofac Facilities Management Limited [2026] CSOH 29 |
Authority noted regarding Company H's position in CVAs and that Company H had not contended a CVA could not be imposed on it. |
Referenced to illustrate that Company H may be bound by insolvency arrangements and did not assert an absolute immunity from being bound. |
| Re Houst Limited [2022] EWHC 1941 (Ch) |
Example of a plan in which Company H was subject to cram down and did not vote in favour. |
Used as historical precedent demonstrating that Company H has previously been bound by sanctioned arrangements despite non‑approval. |
| Re Prezzo Investco Limited [2023] EWHC 1679 (Ch) |
Another example of sanction being given where Company H was subject to cram down. |
Reinforced the point that Company H can be bound by sanctioned plans even if it does not support them. |
| Saipem SPA v Petrofac Limited [2025] EWCA Civ 821 |
Defines the starting point for the "no worse off" test as a comparison between the creditor's existing rights against the plan company in the relevant alternative and the new or modified rights under the plan; extends scope where the plan interferes with creditors' rights against third parties. |
Applied by Judge Green and followed by Judge Lake to determine that the "no worse off" comparison should focus on rights against the plan company, extending to third-party rights only where the plan affects them; used to reject Company H's wider-net submissions regarding overall Exchequer recoveries. |
| [2025] EWHC 2181 (Ch) |
Decision of Judge Hildyard refusing to sanction a related scheme in earlier proceedings. |
Noted as the prior English refusal in related proceedings; part of factual history leading to subsequent proposals and the SPA. |
Court's Reasoning and Analysis
Judge Lake addressed statutory interpretation of Part 26A, particularly sections 901F and 901G. He accepted Judge Green's reasoning (which in turn followed Leech J in Re Nasmyth) that section 901G does not exclude Company H from the statutory scheme and that the court has jurisdiction to sanction a plan that crams down debts owed to Company H, subject to careful scrutiny because Company H is a unique involuntary creditor.
On Condition A (the "no worse off" test), Judge Lake agreed that the relevant alternative was an insolvent liquidation of Company A. He followed Saipem SPA v Petrofac Limited in holding that the starting point for the test is a comparison between the creditor's rights against the plan company in the relevant alternative and the rights under the plan, extending the comparison to third-party rights only where the plan interferes with them. He thus rejected Company H's submission that the comparison should focus on overall Exchequer recoveries (including tax loss utilisation by purchasers) rather than the position in relation to EPL receipts. He noted additional factual matters (e.g., potential claims against joint venture partners) but found that even on the narrower comparison Company H would be no worse off under the Plan than in the relevant alternative.
On fairness, Judge Lake observed that the Plan reflected the only commercially viable deal negotiated among stakeholders (excluding Company H), that Company H would be better off under the Plan than in liquidation, and that concerns about potential abusive tax outcomes could be addressed by Company H's other statutory powers. He concluded that Conditions A and B of section 901G were satisfied, that procedural formalities for creditor meetings had been complied with, that the requisite creditor approvals (over 75% in value of affected classes other than Company H) had been obtained, and that the Plan was fair. Accordingly he exercised the court's discretion under section 901F to grant sanction.
Holding and Implications
SANCTION GRANTED
Holding: The court granted sanction for the Plan under section 901F of the Companies Act 2006.
Implications: The direct effect is that the Plan, once sanctioned, binds the affected classes of creditors and the company in accordance with Part 26A: securities held by Bondholders A and Bondholders B will be released, liabilities under the WEF Bonds and the EPL liability to Company H will be discharged in the terms approved, and payments to trustees and Company H will be made from the SPA consideration according to the approved methodology. The opinion did not purport to establish a novel general rule beyond applying existing authorities; it records acceptance of prior approaches and applies them to the facts to sanction the Plan.