Cross-Class Cram-Down

Part 26A of the Companies Act 2006 (inserted by the Corporate Insolvency and Governance Act 2020) allows a company in or facing financial difficulty to propose a restructuring plan to its creditors or members, voted on in separate classes with each requiring 75% in value approval under s.901F. Section 901G sets out the cram-down mechanism: if a class dissents, the court may still sanction the plan provided two conditions are met. Condition A requires the court to be satisfied that 'none of the members of the dissenting class would be any worse off than they would be in the event of the relevant alternative' — the outcome the court considers most likely if the plan is not sanctioned. Condition B requires that the plan has been approved by a class 'who would receive a payment, or have a genuine economic interest in the company, in the event of the relevant alternative', voting by the same 75% majority.

In practice, Condition B is often described using the shorthand 'in the money' for the approving class — a class whose members stand to receive something of value under the likely alternative to the plan (for example, a solvent wind-down or administration), as opposed to an 'out of the money' class with no real economic stake in that scenario. The cram-down power lets a court bind dissenting creditors or members who would otherwise have a blocking vote, provided the statutory safeguards in s.901G are satisfied and the court, under s.901F, exercises its sanction discretion.