On 1 July 2026, the High Court approved TG Jones' restructuring plan - but the judge (Mr Justice Hildyard) openly questioned whether the turnaround would succeed.
Our Insolvency and Restructuring team explore what the Court’s decision in this case tells us about the current restructuring regime in England and Wales.
What is a Restructuring Plan under Part 26A of the Companies Act 2006?
Introduced in 2020, Part 26A of the Companies Act 2006 provides for a company to enter into a restructuring plan with the approval of its creditors or members.
There is no requirement that the plan seeks to preserve the company’s business as a going concern - it is sufficient if the plan seeks to only improve the dividends available to creditors.
Restructuring plans under Part 26A are available in order to eliminate, reduce, prevent or mitigate the adverse effect on a company’s ability to carry on business as a going concern caused by serious “financial difficulties” that the company encounters or is likely to encounter.
There is no statutory guidance that limits the meaning or scope of “financial difficulties” and therefore this wording can be given a broad interpretation.
The only defining feature is that the financial difficulties will or may impact on the company’s ability to operate as a going concern.
Restructuring plans can be used by companies of all sizes, though the complexity and cost may deter smaller businesses from opting for this procedure.
Medium and large sized businesses with more complex financial structures are more likely to benefit from restructuring plans.
How Cross-Class Cram Downs Work
Dissenting creditors can be bound by a restructuring plan, even if they vote against it, through a process called cross-class cram down.
This mechanism allows a court to sanction a plan and bind all creditors, including those who voted against it, if two conditions are met.
Those conditions are:
- Condition A (the “no worse off test”) is that the court is satisfied that, if the restructuring plan were sanctioned, none of the members of the dissenting class would be any worse off than they would be in the event of “the relevant alternative” i.e. what is likely to occur to the company if the restructuring plan is not sanctioned, e.g. the company entering into administration.
- Condition B is that the restructuring plan has been approved by at least one class of creditors or shareholders who would receive payment or have a genuine economic interest in the company in the event of “the relevant alternative”.
The Background to the TG Jones Case
TG Jones is the trading name of what was once the high street business of WH Smith before it was sold to the Modella investment fund in 2025.
The business currently operates 451 stores and employs 4,700 workers.
The Court was told that the business was “highly distressed” and would have run out of cash in April had it not been for a £10 million loan from Modella and a deferral in liabilities that included a large amount of tax payable to HMRC.
Modella said that the problems the business was facing was due to:
- Serious underinvestment in the retailer’s stores by the chain’s previous owners
- Challenging retail conditions
- The inability to keep the WH Smith brand name as part of the 2025 sale.
The purpose of the restructuring plans (there were two interconnected restructuring plans proposed by companies in the TG Jones group) was to access essential liquidity for the turnaround of the business, reduce and reshape its leasehold property obligations and compromise certain other debts.
The plans had initially been opposed by a number of landlords connected to the British Land group who had described the plans as “fundamentally unfair”.
However, negotiations had taken place between the first and second Court hearings and that had resulted in changes being made to the plans to improve the terms offered to landlords meant that British Land withdrew its opposition.
The restructuring plan forecasts that the business will end up with 302 stores depending on how many landlords exercise their rights to terminate their leases instead of accepting reduced rents.
Why Did the Court Approve the Restructuring Plan?
The issues the judge had to consider in deciding whether to sanction the restructuring plans were:
- The propriety and fairness of approving modified plans that had not been notified to creditors until 23 June 2026 (the day before the creditors met to review, discuss and vote on the proposed plans meaning that creditors had very little time to consider them) notwithstanding a previous court order that stated creditors were to be notified of any changes no later than 16 June 2026.
- The propriety and fairness of exercising cross-class cramdown powers to impose the plans on dissenting creditors in circumstances where the interests of the assenting creditors differed so radically from those of the dissenting creditors.
- The justification for Modella retaining its equity interest in the business.
- The differential treatment within the landlord classes and amongst unsecured creditors.
- Did the plans have a realistic prospect of achieving their purpose or whether they were in reality flawed and likely to fail?
After careful consideration, the Court sanctioned both restructuring plans for the following reasons:
- The Court had jurisdiction to approve the modified plans notwithstanding the fact that creditors had been given very little notice to consider the same.
- The cross-class cramdown powers being imposed on dissenting landlords was the “lesser of two evils resulting from the companies’ trading failures and financial predicaments”. In other words, that the landlords stood to recover more under the restructuring plans than if the TG Jones Group was to enter administration which would involve piece-meal and accelerated/distressed sales of stock.
- The treatment of other creditors (e.g. those described as Core Supply Creditors, Non-Core Supply Creditors and Business Rate Creditors) was “plainly better” than would result from the Group entering administration.
- The modified plans gave the landlords the right to terminate leases if the terms imposed on them by the restructuring plans were less beneficial than would be available by re-leasing the property on the open market.
- The Court only had to be satisfied that the restructuring plans had a real prospect of achieving their purpose, not that the plans would achieve their purpose.
Notwithstanding the Court deciding to sanction the restructuring plans, Mr Justice Hilyard expressed significant doubts about the long-term prospects of the business and described Modella Capital’s strategy as an “adventurous equity play” and said that the turnaround proposals could appear closer to “generic aspirations than concrete grounds for confidence”, adding that the risk involved in executing the plan remained substantial.
Key Takeaways from the Court’s Decision
Timing
The judge was unable to give an instant decision when the hearing on 1 July concluded due to the complexity involved. Instead, the judge took time to consider various factors before sanctioning the plans later that day in a short form judgment (which was followed by a fuller judgment).
Whilst the judge was mindful of the commercial pressures that the TG Jones Group was under, the judge warned that for complex restructuring plans, the Court must have time to discharge its function and properly exercise its discretion when deciding whether to sanction a restructuring plan.
Late notice of final form plans not fatal
The fact that the modified plans were not notified to creditors until the day before the creditors were due to meet, discuss and vote on the plans was not fatal because the modifications only affected Modella and not the creditors.
Realistic prospect of success
The judge considered whether there was a realistic prospect of success or whether in reality the plans were flawed “or more generally, whether the writing is on the wall for retail operations of this kind”.
Whilst the judge noted that there was a high degree of execution risk, he stated that he was not an economist or a retail business expert and was entitled to assume that Modella and its management would not waste further time, money and effort if there was not a reasonable prospect of success.
Negotiations
The judge noted that the negotiations had result in the improvement and evolution of the plans in a way that ultimately supported the Court’s decision to sanction the plans.
The Court said that the modifications to the plans demonstrated that a constructive process had taken place and that this resulted in fairer plans which better balanced the immediate requirements of TG Jones and the longer term interests of the creditors.
How We Can Help
Myerson’s experienced Insolvency and Restructuring team can advise businesses and directors on restructuring plans and navigating financial distress and also support landlords and other creditors affected by restructurings.
Please contact us today for a confidential discussion.
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Vicky Biggs
Legal Director
Vicky is a Legal Director in the Insolvency and Restructuring team at Myerson and has been with the firm since 2012. Utilising her commercial litigation experience, Vicky now specialises in contentious insolvency matters, advising insolvency practitioners, directors and individuals in relation to both corporate and personal insolvency issues.
Vicky advises on a wide range of insolvency matters, including claims made by administrators, liquidators and trustees in bankruptcy, director disqualification proceedings, remuneration approval applications, retention of title claims, validation orders, bankruptcy annulment applications and winding-up and bankruptcy petitions.
About Vicky Biggs