Introduction
If your company is struggling financially but still has a viable future, the Restructuring Plan could offer a lifeline.
Introduced under the Corporate Insolvency and Governance Act 2020, the UK Restructuring Plan provides a powerful tool to help companies restructure their debts and operations, often avoiding insolvency altogether.
In this guide, we’ll explain what a Restructuring Plan is, how it works, who can use it, and why it might be the right option for your business.
Related: Business Restructuring Explained
What is a Restructuring Plan?
A Restructuring Plan is a formal, court-approved agreement that allows a company in financial distress to reorganise its liabilities or operations.
It involves proposing a compromise or arrangement with creditors and/or shareholders to stabilise the business.
Key features of a Restructuring Plan include:
- Flexibility: Each plan is tailored to the company’s specific needs.
- Cross-class cram down: A plan can be approved even if some creditor groups object.
- Court oversight: The process is supervised and approved by the courts, adding legal certainty.
The Restructuring Plan is similar to a Scheme of Arrangement but offers greater powers to companies, especially where creditor agreement is not unanimous.
Who Can Use a Restructuring Plan?
A company can propose a Restructuring Plan if:
- It has encountered, or is likely to encounter, financial difficulties that could affect its ability to continue trading.
- The purpose of the plan is to eliminate, reduce, prevent, or mitigate the effect of those financial difficulties.
Both solvent and insolvent companies can use a Restructuring Plan.
However, it is often most attractive to companies that are viable in the long term but need breathing space to fix immediate issues.
Explore: Signs You Might Need to Restructure
How the Restructuring Plan Process Works
The Restructuring Plan follows a court-supervised process with several key stages:
1. Drafting the Plan
The company, often with professional advisors, creates a detailed proposal outlining:
- The financial difficulties it faces
- How the plan will address these
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How different classes of creditors and shareholders will be treated
2. Applying to Court for Directions
An initial court hearing (“convening hearing”) is held to:
- Approve the classification of creditor/shareholder groups
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Set out how meetings will be held to vote on the plan
3. Meetings and Voting
An initial court hearing (“convening hearing”) is held to:
- Approve the classification of creditor/shareholder groups
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Set out how meetings will be held to vote on the plan
4. Court Sanction
If the court is satisfied the plan is fair and meets the legal requirements, it will approve it.
The plan then becomes binding on all parties.
5. Implementation
The company implements the restructuring according to the terms of the plan.
Advantages of a Restructuring Plan
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Flexibility to tailor solutions to the company’s unique situation
- Ability to override dissenting creditors where appropriate
- Preservation of business value by avoiding formal insolvency
- Court protection adds credibility and legal certainty
A Restructuring Plan can save jobs, protect stakeholder interests, and give companies a fresh start.
Disadvantages and Challenges
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Cost: Legal and advisory fees can be significant
- Complexity: The process can be legally and procedurally complex
- Time: Court hearings and creditor meetings take time to organise
Because of these factors, Restructuring Plans are usually most suitable for medium to large companies where the benefits clearly outweigh the costs.
Real-World Example
A major UK retail chain, facing falling foot traffic and unsustainable debts post-pandemic, proposed a Restructuring Plan to:
- Reduce rental obligations on unprofitable stores
- Extend loan repayment terms
- Secure new investment to fund a shift towards online retail
Despite some landlord opposition, the court approved the plan, saving hundreds of jobs and giving the business a viable path forward.
Is a Restructuring Plan Right for Your Company?
If your company is:
- Facing creditor pressure
- Struggling with unsustainable debts
- Still fundamentally viable with a realistic turnaround plan
…then a Restructuring Plan could be the tool you need.
However, it’s not the only option. Informal restructuring, CVAs, administration, and solvent restructuring solutions may also be worth considering, depending on your situation.
Explore: Company Restructuring vs Insolvency
How Business Helpline Can Help
Understanding whether a Restructuring Plan is right for your company requires expert advice.
At Business Helpline, we offer:
- Free, confidential 24/7 advice for directors
- Help assessing your company’s options
- Introduction to trusted legal and financial advisors if a Restructuring Plan is appropriate
- Support through every step of the decision-making process
Don’t face these challenges alone. Call Business Helpline today on 0800 088 2142 for free, no-obligation advice.
Conclusion
The UK Restructuring Plan offers companies a powerful, flexible tool to overcome financial difficulties and secure a stronger future.
If you’re worried about your company’s finances, understanding all your options — including a Restructuring Plan — could be the key to survival and success.
Take control early. Seek professional advice. And remember, support is just a phone call away.
Contact Business Helpline for free expert guidance today.
