Restructuring Plans for the SME: Houst


When restructuring plans were introduced at the height of the coronavirus pandemic by way of the new Part 26A of the Companies Act 2006, there was some scepticism about whether they would ever be used for SME businesses. That was partly because of the costs involved, and because they seemed best suited to situations where there were evidently different classes of creditor and cross class cramdown may be particularly useful.


We now have an SME restructuring plan approved following the decision of Mr Justice Zacaroli on 22nd July 2022. Broadly speaking, Houst was a provider of management services in relation to holiday letting services. It suffered drastically through the Covid Pandemic. The court accepted it was insolvent and that the likely alternative to a restructuring plan being allowed by the court was a prepack administration. In such an administration the Court accepted that the secured creditor may have received a dividend of some 7 pence in the pound, and HMCR preferential debt was likely to attract a dividend to them of some 15 pence in the pound.

The Court has approved a restructuring plan where the shareholders participate in advancing a capital injection, depending on circumstances, of between £0.5 and £0.75 Million; the secured debt is reduced (with the Bank receiving a dividend of around 27 pence in the pound); and contributions are made to an unsecured creditor fund and a preferential creditor fund so that HMRC and unsecured creditors receive 20 pence in the pound and 5 pence in the pound respectively. HMRC voted against the plan. They indicated that they were doing so as a matter of policy because the reintroduction of the Crown preference was not something they were willing to give up. They were held to represent a class on their own as a preferential creditor. Ultimately, Mr Justice Zacaroli granted the plan on the basis that HMRC would actually be better off than in the relevant alternative and had not opposed the Court application


Not every case will be like this. It is significant that creditors seemed to be satisfied apart from HMRC. However, it does illustrate that restructuring plans should not be written off in an SME scenario. It also illustrates that if HMRC may still be crammed down as preferential creditor at the discretion of the Court. We would expect the Scottish Court to find Mr Justice Zacaroli’s reasoning highly persuasive. The restructuring plan should not be written off quite yet!



BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal ( briefing note is current as at 25 July 2022 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).