The High Court has dismissed a challenge to Caffe Nero's company voluntary arrangement (CVA) in Young v Nero Holdings Limited. The Applicant in the proceedings, Mr Young, was a landlord of premises let to the First Respondent, Nero Holdings Limited (the Company) and challenged the Company's CVA under s 6(1)(a) and (b) of the Insolvency Act 1986 (the Act). Mr Young alleged that the Company's CVA was unfairly prejudicial to the rights of creditors and that the procedure and circumstances around the approval of the CVA were materially irregular.
Mr Justice Green firmly rejected all of Mr Young's allegations of material irregularity and unfair prejudice and dismissed the challenge application.
Travers Smith acted for the nominees, Mr William Wright and Mr David Costley-Wood (both then partners of KPMG LLP), who were named as co-respondents to the application.
Key takeaways at a glance:
- Electronic voting procedures can be used for CVA processes, but the procedure for adjourning or postponing the voting deadline if this becomes necessary or desirable is uncertain.
- Nominees of CVAs will be judged on whether they acted rationally and in good faith. The court will only interfere where the nominee has done something that no reasonable nominee would have done in the circumstances.
- A material irregularity challenge to a CVA will only be successful where there is a substantial chance that it would have made a material difference to the way in which creditors consider and assess the terms of a CVA.
- Modifications to CVAs can be introduced during the course of an electronic voting procedure after creditors have begun voting. Aggrieved creditors' redress in this instance would be to commence challenge proceedings post-approval of the CVA.
- Last-minute offers to acquire a business may be unlikely to de-rail an electronic voting process. Bidders would be recommended to take earlier action if they wish to delay a CVA vote while a potential transaction is considered.