Pari passu meaning

Re Madagascar Oil Ltd [2025] EWHC 1015 (Ch) What are the practical implications of this case? This judgment marks the first reported approval of an English restructuring plan that splits two creditors into separate classes, establishing a benchmark for using the fewest possible classes to ring-fence objecting creditors. Businesses can be more confident about placing creditors into tailored classes even where they would share the same insolvency ranking, provided the plan delivers materially different outcomes for them. The ruling endorses recognition of divergent creditor interests where it is not feasible for those creditors to confer with a view to their common interest... What was the background? Madagascar Oil Ltd (MOL) is a Mauritian-incorporated company with its head office in the UK. It forms part of a group that includes its operating subsidiary, Madagascar Oil SA (MOSA), and its parent, BMK Resources Ltd (BMK). The group holds exclusive rights to develop a technically challenging oilfield in Madagascar; however, production is currently suspended and the group is in...

Re Sova Capital Ltd (company number 04621383) (in special administration) [2023] EWHC 452 (Ch), [2023] All ER (D) 24 (Mar) Background to Sova and the Special Administration Sova, authorised by the Financial Conduct Authority (FCA), operated as an investment brokerage firm. It acted for institutional counterparties, with its trading largely focused on the Russian market. Following the upheaval in markets triggered by Russia’s invasion of Ukraine, the firm encountered acute liquidity pressures, prompting its directors to seek an English Court order placing it into special administration under the Investment Bank Special Administration Regulations 2011, SI 2011/245 (the IBSA Regulations). The business oversaw assets totalling several billions of pounds sterling across its client assets sourcebook (CASS) structures—covering client money and custody assets—as well as its own house book. The IBSA Regulations were introduced to tailor the insolvency framework for investment businesses like Sova, drawing on the experience of the Lehman administration. Background to the Transaction Given its role as a broker in the Russian arena, 87% of...

Re Madagascar Oil Limited [2025] EWHC 2129 (Ch) What are the practical implications of this case? Madagascar Oil is poised to carry notable consequences for restructuring practitioners and insolvency litigators. First, it stands as a rare yet effective instance of a ‘cram across’, where an approving class was employed to force a plan on a dissenting class of equal priority, demonstrating that cross‑class imposition can still succeed in appropriate circumstances. Only one other ‘cram across’ has been recorded: Re Sino‑Ocean Group Holding Ltd [2025] EWHC 205 (Ch). Although Sino‑Ocean came before Petrofac, Madagascar Oil achieved a ‘cram across’ notwithstanding the significant constraints the Court of Appeal imposed on the cramdown jurisdiction. Second, the judgment shows that granting a dissenting creditor participation in future revenues, or alternative ‘synthetic equity’ within a plan, can evidence that the Plan distributes the gains of the restructuring fairly while permitting existing shareholders to retain some (or even all) of their equity. Structured in this way, a plan may allocate value credibly between stakeholders yet...

Modifications to company voluntary arrangements (CVAs) There is limited statutory direction on how CVA modifications should be approached. Some direction appears in Statements of Insolvency Practice (SIP) 3.2. Alterations to a CVA proposal are acceptable, so long as they do not: reshape the CVA so extensively that it is no longer a CVA at all (for example, a change compelling the company to enter administration would be impermissible) restrict, vary, or diminish a secured creditor’s right to realise its security without that creditor’s express consent reorder distributions so that any preferential creditor loses priority over non-preferential creditors without that creditor’s express consent upset the rule that all preferential creditors share dividends pari passu without the disadvantaged creditor’s express consent Amendments affecting preferential creditors cannot be approved merely because a majority of preferential creditors agree; each affected preferential creditor must consent. Creditors or members may propose modifications before the proposal is considered...

In both corporate and personal insolvency, office-holders chiefly gather the company’s or individual’s assets, realise them and distribute the proceeds to creditors in accordance with the statutory waterfall. For more detail, consult the following Practice Notes: Waterfall of payments—a comparative guide Waterfall of payments in administration Waterfall of payments in liquidation Waterfall of payments in bankruptcy Waterfall of payments in administrative receivership Pari passu distribution Pari passu, a Latin term, translates as ‘with an equal step’ or ‘on equal footing’. In insolvency, it captures the principle of proportionality and is used to describe how creditors are treated relative to one another. Where claims rank ‘pari passu’, all creditors within the same class are paid alike, with no one preferred. If funds are insufficient to satisfy debts in full, distributions are made pro rata on a pari passu basis, so each receives a proportionate return. For instance, unsecured creditors (ie creditors in the same category) might receive 10p...

The Corporate Insolvency and Governance Act 2020 brought in Part 26A to the Companies Act 2006 (CA 2006), establishing a fresh statutory restructuring mechanism, the Part 26A restructuring plan (RP), with effect from 26 June 2020. The regime is complemented by the relevant Practice Statement (see Practice Note: The Practice Statement for Part 26 schemes and Part 26A restructuring plans (2025)) and by the Explanatory Notes issued by the Department for Business, Energy and Industrial Strategy (now the Department for Business and Trade), which Snowden J in Re Virgin Atlantic Airways, applying Re Flora v Wakom (Heathrow) Ltd, confirmed, per Snowden J, are admissible as an interpretative aid notwithstanding even without proving ambiguity or obscurity. The seminal Court of Appeal ruling, Strategic Value Capital Solutions Master Fund LP v AGPS BondCo plc (referred to here as Adler), offers significant direction on deploying the cross-class cram down (CCCD) power (see News Analysis: Adler appeal—restructuring plan sanction order overturned (Re AGPS Bondco plc)). Snowden LJ gave the principal judgment (with which Nugee...