When the Corporate Insolvency and Governance Act 2020 (CIGA) introduced the restructuring plan in England, comparisons with plans of reorganization under chapter 11 of the United States Bankruptcy Code (U.S. Bankruptcy Code) were inevitable.
A rundown of the similarities between the two processes is easy: both are court-sanctioned and based on classes, with the ability to compromise claims and/or interests held by secured creditors, unsecured creditors and equity holders (including through cross-class cram down). In addition, neither interferes with directors’ powers of management (in the U.S., absent significant showings of mismanagement or fraud). Despite their similarities, there are some obvious differences: different voting thresholds, U.S. statutory authority to obtain debtor-inpossession (DIP) financing, the “absolute priority rule” in chapter 11, and the lack of a statutory automatic stay in England. Now, with the benefit of more than two years of learning on English restructuring plans, it is an opportune time to re-visit those initial comparisons. In this article, we will consider some of the key features of the English regime, including the experience from the case law to-date, how the developments in the English cases contrast with the position and approach under chapter 11, and the practical significance of those differences.