The High Court has ruled it had no jurisdiction to confirm a proposed examinership scheme for Mac Interiors Limited after finding that the scheme’s only approving class of impaired creditors was improperly formed.
Revenue Commissioners, owed about €14.36 million, objected to the proposed scheme. They argued that trade creditors placed in a separate “Retained Project Creditors” class should instead have been grouped with other unsecured creditors. That wider class voted against the proposals.
Mr Justice Michael Quinn’s judgment, delivered on 9 October 2023, says the Retained Project Creditors and other unsecured creditors had the same legal rights and were offered the same 1.5% dividend. The examiner had separated creditors whose claims were associated with projects he considered live or ongoing, on the basis that they were likely to continue trading with the company.
The judge held that this expected future relationship was too uncertain to justify splitting creditors with otherwise identical rights. For a non-rights-based distinction to support separate classes in exceptional circumstances, the court said, it must relate to consideration of the scheme, rest on verifiable criteria that are not vague or speculative, and be clearly defined in the examiner’s proposals. The distinction in this case did not meet those requirements; the proposals themselves did not define the class or explain its distinction from other unsecured creditors.
The Retained Project Creditors class was the only impaired class to approve the proposals. Fifty-nine creditors, with claims of €1,760,261, voted in favour; 11, with claims of €757,584, voted against, and one abstained. The unsecured class, which included Revenue’s non-preferential debt, also voted against. The court concluded that no validly formed class of impaired creditors had accepted the proposals, so the statutory voting condition was unmet and the court could not confirm the scheme.
The proposed arrangement depended on investment by Quartz Holdco Limited, including a €2.25 million subordinated shareholder loan and a €1.5 million working-capital facility. The judgment records that the examiner and Revenue’s insolvency expert considered the proposals met other confirmation requirements, including the best-interests-of-creditors test and the prospect of continued operation. Those matters did not overcome the class-formation defect. The court’s decision was that it lacked jurisdiction to confirm these proposals; the judgment does not confirm the scheme.