There is a lot under the surface of Justice Miles ruling in the Amigo Loans judgement. The court continues to reinforce the need for fairness, the increasing focus on the reality of what a relevant alternative actually is for a proposed restructuring and the fact that the regulator is stepping in to protect customers, despite 75,000 of them approving the scheme.
Fairness remains the central principle held by the court in approving a restructuring and we have seen it form a key component of the judgments recently passed down in the Virgin Active, New Look and Regus cases.
One developing area that is coming into sharp focus in restructurings is the comparator (ie the alternative outcome if the restructuring is not approved). Amigo Loans further heightens this point as the court dismissed the assertion that imminent insolvency would occur if the scheme was not approved. This highlights the importance of ensuring the comparator is a realistic alternative outcome.
The FCA has increased its scrutiny of the payday loans market in recent years. Its intervention on behalf of customers in the Amigo Loans situation shows that it will not hesitate to take action to protect consumers, particularly in a market that is reputed to take advantage of vulnerable people.
So what have these developments told us for those looking to undertake a restructuring – make sure its fair, make sure that the alternative is a realistic outcome against which its judged and make sure those impacted have adequate knowledge to cast their vote.
None of this in itself is groundbreaking news but a welcome and timely reminder. As for Amigo, we will have to see what comes next and time will tell if, as the FT article suggests, insolvency really was the right comparator…