Poundland has become the latest major retailer to seek relief under Part 26A of the Companies Act 2006, following its sale to US investor Gordon Brothers for £1 and debts exceeding £253 million. The High Court sanctioned the company’s restructuring plan on 26 August 2025, despite opposition from landlords, marking another significant example of how this powerful – and controversial – insolvency mechanism continues to shape corporate rescues in the UK.

Poundland Limited (‘Poundland’), the well-known high street retailer, is one of the most recent high-profile companies to seek a compromise with its creditors under Part 26A of the Companies Act 2006 (‘Companies Act’), following in the footsteps of such household names as Virgin Atlantic, Thames Water and River Island.

Poundland proposed its restructuring plan following a period of poor financial performance and its sale to US investment firm Gordon Brothers for just £1. The company’s debts are said to have exceeded £253.4m with forecast losses for 2025 in excess of £117m. The High Court judge who sanctioned the company’s plan on 26 August 2025, Sir Alastair Norris, was told that, in the absence of sanction, Poundland would run out of cash by 7 September 2025. Had sanction been refused, Poundland would inevitably have gone into administration or liquidation.

As Poundland’s decision to restructure using Part 26A demonstrates, this relatively new provision of the Companies Act has become an increasingly popular – as well as controversial – option for rescuing larger companies facing insolvency.

What is Part 26A?

Part 26A was inserted into the Companies Act by the Corporate Insolvency and Governance Act 2020 at the height of the COVID-19 pandemic and has already generated a significant body of caselaw.

Under  its provisions a company that has encountered, or is likely to encounter, financial difficulties that are affecting, or may affect, its ability to carry on business as a going concern can propose a compromise or arrangement (the ‘Restructuring Plan’) to its creditors or members, or any class of them, in order to eliminate, reduce or mitigate those financial difficulties. If sanctioned by the court, the Restructuring Plan will bind any dissenting classes of creditors or members – commonly referred to as the cross-class cram down.

Part 26A therefore provides a way to rescue companies which have fallen into or are facing insolvency – so long as they can afford the very significant costs of the process, which requires at least two court hearings. Indeed, as an example of how complex (and therefore costly) such plans can be to formulate, Poundland’s Restructuring Plan presented to the court and creditors ran to 218 pages.

To seek relief under Part 26A, an application must be made to court with supporting evidence. The application can be made by the company, any member or creditor of the company, or a liquidator or administrator of the company, although in practice most such applications will be made by the company. A meeting of creditors (or members) to consider the Restructuring Plan can only be held if the court is satisfied on the evidence before it that an order should be made summoning a meeting (this first hearing is known as the convening hearing).

If at least 75% in value of the creditors (or members, as the case may be) present at the subsequent meeting vote to approve the Restructuring Plan, the court will then be asked to sanction it. Even if the Restructuring Plan is not agreed by at least 75% in value of a particular class of creditors or (as the case may be) members of the company at the meeting, termed the ‘dissenting class’, the court can still sanction the plan, ‘cramming down’ the dissenting class, if satisfied that:

• None of the members of the dissenting class would be any worse off under the Restructuring Plan than they would be in the event of what is called the ‘relevant alternative’ to the plan occurring instead, and
• The Restructuring Plan has been agreed by at least 75% in value of a class of creditors or (as the case may be) of members who will receive a payment, or have a genuine economic interest in the company, in the event of the ‘relevant alternative’ occurring instead.

The ‘relevant alternative’ is defined as whatever the court considers would be most likely to happen to the company if the Restructuring Plan is not sanctioned – invariably that will be its entry into administration or liquidation.

Poundland’s Plan

Central to Poundland’s Restructuring Plan was the need to reduce rent arrears and the company’s liability for future rent in respect of its extensive portfolio of stores, many of which were considered to be over-rented. The plan therefore provided for the compromise of rent arrears and imposed rent reductions on the majority of Poundland’s landlords, who were grouped into nine classes, by up to 75%.

The convening hearing was held in the High Court on 8 July 2025[1]. After considering the terms of the plan, Mr Justice Thompsell ordered that a creditors’ meeting should be held. In his judgment, the judge noted that the plan involved identifying and treating differently 14 classes of Plan Creditors including nine classes of ‘Landlord Plan Creditors’ in respect of 476 leases. Landlords had been divided up into these classes according to the profitability and strategic importance of their leased stores with only those landlords whose stores were characterised as “Class A” avoiding the compromise of rent arrears and imposed rent reductions.

Unsurprisingly many landlords complained that the proposed restructuring was largely at their expense and at the creditors’ meeting the plan was not approved by the requisite majority of landlord creditors (75% or more in value) although other classes of creditors voted in favour.

Despite this objection Sir Alastair Norris sanctioned Poundland’s Restructuring Plan on 26 August 2025, ‘cramming down’ the dissenting landlords. None of them appeared at the hearing to oppose the plan and Poundland’s application therefore faced no opposition. Whether the plan will now achieve its objective of returning Poundland to solvency and enabling it to trade profitably going forward remains, however, to be seen.

The dissenting landlords could have intervened on 26 August, but, whether on advice or due to the likely cost, chose not to do so. This was despite the recent Court of Appeal decision in Saipem & Ors v Petrofac Limited and Petrofac International (UAE) LLC[2], handed down on 1 July 2025, which makes clear that the court must be satisfied as to the overall fairness of the Restructuring Plan before it will sanction a cross-class cram down. Petrofac represents a new approach to applications under Part 26A with greater attention being paid to the interests of junior and ‘out of the money’ creditors, in other words creditors who are unlikely to receive anything if the company goes into liquidation or administration instead.

In Petrofac, the Court of Appeal set aside the lower court’s order sanctioning Petrofac Limited and Petrofac International (UAE) LLC’s Restructuring Plans following an appeal by several creditors. This decision highlights that the court has a wide discretion to refuse sanction if the plan does not provide for a fair distribution of the benefits of the restructuring among the different classes of creditors, including ‘out of the money’ creditors. Further, as the Court of Appeal made clear, ‘the burden of establishing that a plan is fair, so as to justify the exercise of the court’s discretion to sanction a plan notwithstanding the presence of a dissenting class or classes, rests squarely on the plan company’ – which therefore needs to engage in genuine negotiations with all classes of creditors before seeking sanction.

While the facts of Petrofac are very different to the Poundland case – as it concerned the proposed treatment under the plan of a particular class, the providers of ‘new money’, with the Court of Appeal finding that they were to receive an excessive return which was inherently unfair –  this new emphasis on fairness as an overriding principle suggests there may now be more scope for dissenting creditors to oppose the granting of sanction.

While it is not known what advice the dissenting landlords in Poundland received,  it appears  that Poundland  was able to forestall a challenge by including, possibly in response to the Petrofac judgment, an “upside sharing mechanism” in the plan, under which all but the Class A landlords are to share financially in the company’s future success if targets are met.

Key Takeaways

Restructuring under Part 26A of the Companies Act is a rapidly developing area of law, and the Supreme Court may yet be asked to rule on the approach taken by the Court of Appeal in Petrofac.

However, as matters currently stand, key takeaways for companies planning to propose a Restructuring Plan include: ensure it’s fair; ensure out of the money creditors will also benefit; do not unfairly favour a particular class, and engage in genuine and good faith negotiations with all classes of creditors including those out of the money.

For dissenting creditors: assess the plan’s fairness in light of Petrofac; make any concerns known to the plan company as early in the process as possible and make sure they engage in genuine negotiations.

Opposing the grant of sanction at the return hearing (the sanction hearing) carries, of course, the risk of an adverse costs order if unsuccessful but the court will not usually penalise a dissenting creditor in costs if their objections (although unsuccessful) are not considered to have been frivolous and were properly and reasonably made.

[1] Re Poundland Limited [2025] EWHC 1822 (Ch), 2025

[2] [2025] EWCA CIV 821