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The court’s discretion in relation to the Pt 26A cram down
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This article explains that a fundamental purpose of the court’s discretion whether to exercise its cram down power under the new Pt 26A process now found in the Companies Act 2006 would be to ascertain whether the dissenting class was promised a just and equitable distribution of the restructuring surplus ie the value expected to be preserved and perhaps created by the proposed plan itself. By way of comparison Chapter 11 of the US Bankruptcy Code which contains the best-known cram down mechanism requires the court to ensure a “fair and equitable” treatment of members of the dissenting class. In the US however the much-misunderstood Absolute Priority Rule (APR) supposedly governs this exercise. This article shows that the APR is untenable and is honoured as much in breach in US practice as in observance. Similarly the cram down powers under the new Dutch...
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