A restructuring plan under Part 26A of the Companies Act 2006 is a court sanctioned compromise between a company in financial difficulty and its creditors or shareholders, voted on in classes. Its defining feature is cross class cram down: the court can impose the plan on a class that voted against it, provided that class is no worse off than in the most likely alternative and at least one class with a real economic interest has approved it.

What is a restructuring plan?

Part 26A was inserted into the Companies Act 2006 by the Corporate Insolvency and Governance Act 2020, with effect from 26 June 2020. It is modelled on the long established scheme of arrangement in Part 26, but adds the power to bind dissenting classes. The government’s 2022 evaluation lists the policy aims: stopping a secured creditor from blocking a well supported rescue, letting courts sanction plans where it is fair and equitable to do so, allowing viable businesses to restructure with limited disruption, and providing an alternative to a scheme where not every class will agree.

A plan is not a formal insolvency procedure. The directors stay in control and there is no insolvency practitioner in office unless the company is already in administration or liquidation.

Which companies can use one?

Section 901A requires two conditions:

  • Condition A: 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: a compromise or arrangement is proposed with its creditors or members, or any class of them, and its purpose is to eliminate, reduce, prevent or mitigate the effect of those difficulties.

The company need not be insolvent. Any company liable to be wound up under the Insolvency Act 1986 is within the definition of company for Part 26A.

How does the court process work?

The 2022 evaluation describes two court hearings.

  1. Convening hearing. The company, a creditor, a member, or a liquidator or administrator applies under section 901C for the court to order meetings of the creditors or members. The proposer divides them into classes according to the similarity of their rights and interests. Every creditor or member whose rights are affected must be allowed to take part, unless the court is satisfied that a class has no genuine economic interest in the company (section 901C(4)), in which case that class can be excluded entirely.
  2. Class meetings. Each notice must come with an explanatory statement setting out the effect of the plan and any material interests of the directors (section 901D). Failing to provide it is an offence by the company and its officers in default.
  3. Sanction hearing. If 75% in value of those present and voting in a class agree, that class has approved the plan (section 901F(1)). The court then decides whether to sanction it. Once sanctioned, the plan binds all the creditors and members in the relevant classes and the company, but only takes effect when a copy of the order is delivered to the registrar of companies (section 901F(6)).

Unlike a Part 26 scheme, which needs a majority in number as well as 75% in value in each class (section 899), a restructuring plan has no headcount test.

How does cross class cram down work?

Section 901G applies where a class does not reach the 75% threshold. The court can still sanction the plan if two conditions are met:

  • Condition A (no worse off): the court is satisfied that no member of the dissenting class would be any worse off under the plan than in the “relevant alternative”, meaning whatever the court considers would be most likely to happen if the plan were not sanctioned.
  • Condition B (an in the money class approves): at least one class that would receive a payment, or has a genuine economic interest in the company, in the relevant alternative has approved the plan by 75% in value.

Even if both conditions are met, sanction remains at the court’s discretion. The relevant alternative is usually a formal insolvency, often a pre pack administration or liquidation, so valuation evidence of what each class would receive in that scenario is central to most contested plans.

How is it different from a CVA?

Feature Restructuring plan CVA
Legislation Companies Act 2006, Part 26A Insolvency Act 1986, Part I
Court involvement Two hearings and court sanction Reports to court only, no approval hearing
Voting 75% in value in each class 75% in value of all creditors responding, with an unconnected creditor block
Secured creditors Can be bound, including by cram down Cannot be bound without consent (section 4(3))
Preferential creditors Can be crammed down if no worse off Priority protected without consent (section 4(4))
Shareholders Can be compromised as a class Vote, but creditors’ decision prevails

The evaluation notes that the insolvency priority rules do not apply in a restructuring plan, giving the example of Re Houst Ltd, where HMRC was crammed down although it would have been a preferential creditor in the alternative of a pre pack administration. In a company voluntary arrangement, that would not have been possible without HMRC’s agreement.

When are restructuring plans used?

Take up has been modest. The evaluation counted 12 companies with a plan registered at Companies House between 26 June 2020 and 30 September 2022. In the evaluation’s survey, 90% of respondents thought plans too expensive for the small and medium sized business market, although Houst showed a smaller company could succeed. The evaluation also recorded concerns that the cost of challenging a plan at the sanction hearing makes it hard for dissenting creditors to protect themselves.

A plan can also be combined with other procedures. An administrator’s proposals can include a Part 26A plan (Schedule B1, paragraph 49(3)), and on sanctioning a plan for a company in administration or liquidation the court can end the appointment or stay the proceedings (section 901F(4)).

What does HMRC expect?

HMRC’s guidance says it considers schemes and plans case by case and will only support those with a realistic chance of succeeding. It expects the company to file all its tax returns first and to provide its true asset and liability position, relevant independent valuations, an explanation of why it needs to restructure, what will change, and any new finance. HMRC is less likely to support a plan where other creditors are being paid while HMRC is not, where the company’s history suggests it will not meet future obligations, or where the plan would stop HMRC recovering future liabilities. Proposals go to HMRC’s Debt Management team, marked as a proposed restructuring plan under Part 26A.

What special rules apply?

  • After a moratorium. If the convening application is made within 12 weeks after a Part A1 moratorium ends, creditors for moratorium debts and priority pre moratorium debts cannot vote, and the plan cannot compromise them without their consent (section 901H).
  • Pension schemes. Where the company has a defined benefit scheme, notices sent to creditors must also go to the Pensions Regulator, and for an eligible scheme to the Board of the Pension Protection Fund (section 901I).

How does a cram down vote work?

Illustration only. A retailer owes £20 million to a secured lender, £3 million to HMRC and £5 million to landlords and trade creditors. Evidence shows that if the plan fails, the most likely outcome is a pre pack administration in which the lender recovers £12 million, HMRC £1 million and unsecured creditors nothing. The plan offers the lender £14 million over three years, HMRC £1.2 million and unsecured creditors 5p in the pound. The lender’s class approves. The unsecured class votes against. Condition A is met because unsecured creditors receive more than nothing, and Condition B is met because the lender’s class has a genuine economic interest in the relevant alternative. The court may sanction the plan over the unsecured creditors’ objection.

What mistakes should companies avoid?

  • Getting the classes wrong. Class composition is tested at the convening hearing and errors can sink the plan.
  • Weak evidence of the relevant alternative. Cram down depends on proving that dissenting creditors are no worse off.
  • Approaching HMRC late or with unfiled returns, contrary to its published expectations.
  • Underestimating cost. The evaluation found plans widely seen as too expensive for smaller companies, where a CVA or liquidation may be more proportionate.
  • Overlooking directors’ duties while the plan is prepared. Once insolvency is likely, directors must weigh creditors’ interests.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.