The Promise and Pitfalls of U.K. Law-Based Restructuring Plans for U.S. Companies

Much has been written about the potential of the U.K.-law Restructuring Plan (“RP”) as an alternative to a U.S. Chapter 11 process. Several key features of U.K. RPs have piqued interest among restructuring professionals. Those features include the ability to target specific debt for restructuring rather than deal comprehensively with all of a company’s assets and liabilities and impose a cram down across creditor classes (subject to class composition and fairness principles). The recent case study of Texas-based Fossil Group Limited (“Fossil”), which restructured a set of U.S. law-governed notes under a U.K. RP and a corresponding U.S. Chapter 15 recognition proceeding, has intensified consideration of the process. While this approach worked for Fossil, and may be advisable for other U.S.-based companies facing financial strain, its use is not without limits, as U.S. courts remain attentive to concerns around jurisdiction, creditor expectations, and forum shopping.

Nevertheless, as discussed throughout this alert, the Fossil case underscores both the opportunities and the guardrails that will shape the future use of U.K. RPs by U.S.-based companies.

I. WHAT IS A U.K. RESTRUCTURING PLAN AND HOW DOES IT TAKE EFFECT IN THE U.S.?

For American companies (or their lawyers) unfamiliar with the U.K.’s court-sanctioned restructuring process, in short, an RP is an in-court restructuring procedure typically used by a company to eliminate, reduce, or mitigate its financial distress. RPs were introduced in 2020, in the context of the economic difficulties caused by the COVID-19 pandemic, to offer a flexible, court-supervised mechanism for companies in financial difficulties to restructure their debt.¹ The minimum requirements for a company to commence an RP are:

1. that the company is experiencing or is likely to experience “financial difficulties” that affect, or may affect, the company’s “ability to carry on business as a going concern”²;
2. that the proposed plan must be a compromise or arrangement with the relevant company’s creditors or its members (or any class of them), and its purpose must be to eliminate, reduce, prevent, or mitigate the effect of the company’s financial difficulties³; and
3. if applicable, that the company has a “sufficient connection” to the U.K.

An RP can typically be implemented in a matter of months, although timing varies significantly depending on the complexity and the level of creditor opposition. The process involves two main hearings: (1) a convening hearing that principally determines class composition, jurisdiction, and whether permission is granted to convene creditor or member meetings, and (2) a sanction hearing at which the court decides whether to approve the plan.⁴

For an RP to be enforceable in the U.S. with respect to U.S. law-governed debt, the borrower would need to have a U.S. bankruptcy court recognize the RP pursuant to a Chapter 15 recognition proceeding.⁵ If recognition is granted, the U.S. bankruptcy court will issue an order enforcing the effect of the U.K. RP proceeding in the U.S.

II. WHAT ARE THE KEY FEATURES OF A U.K. RP?

An RP may potentially have certain advantages over a Chapter 11 proceeding, including:

• Unlike a Chapter 11, an RP has no numerosity requirement for class acceptance. Instead, only 75% in value of a creditor (or member) class present for voting is required to approve the plan.⁶ In contrast, a Chapter 11 plan requires approval by 66.67% in value and over half in number of creditors voting in a class, so a dispersed creditor class or small-value holdouts may complicate a prospective Chapter 11 plan.
• An RP allows for a cross-class cram down, so long as the court finds that (1) dissenting creditors are no “worse off” than they would be under the relevant alternative (usually, but not always, insolvent liquidation); (2) at least one in-the-money class votes for approval, in which case an RP can be approved over dissenting creditors; and (3) exercising its sanction discretion, it is fair to impose the RP on the dissenting class (which may include consideration, among other things, as to whether the RP provides a fair distribution of the benefits generated by the restructuring between the assenting and dissenting classes).⁷ However, importantly, there is no application of the absolute priority rule to RPs which, in the Fossil case, permitted, among other things, the equity holders to retain their interests. Although under Chapter 11 a plan also can be approved over a dissenting class so long as it is “fair and equitable” and does not “unfairly discriminate,” issues in complying with the absolute priority rule may make it a more complicated process than under the RP.⁸
• U.K. proceedings remain comparatively permissive in allowing court-sanctioned third-party releases of affiliate entity and board member liability post-insolvency—something no longer allowed on a nonconsensual basis in the U.S. under Purdue.⁹

On the other hand, RPs have significant limitations, particularly in regards to operational restructuring tools that may be needed for distressed companies. For example, there is no mechanism for assuming or rejecting executory contracts in an RP. Nor is there any established Debtor-in-Possession (DIP)-financing regime, which typically means the company needs to fund the RP process through existing cash or under its existing debt agreements (often a significant constraint). Additionally, RPs do not have an automatic stay (though the court may grant a stay to support the plan or a stay may be implemented through the terms of the plan itself) to prevent creditors from taking action against the debtor.¹⁰ Consequently, when a company is facing severe operational and financial distress, it likely should consider alternative mechanisms for restructuring.

III. FOSSIL’S SUCCESSFUL U.K. PIVOT TO UTILIZE AN RP

The recent case study of Fossil’s use of the U.K. RP to restructure a specific debt provides some insight into the benefits but also limitations of the procedure.

Fossil was looking to refinance $150 million of U.S. law-governed unsecured notes. While two institutional holders held over 60% in value of the notes, the other 40% was held by non-institutional holders, and the expectation was that most of these holders would not participate in any tender or consent process. Further, there were concerns that the hundreds of non-institutional holders (some of whom held amounts as small as $25) would stymie a Chapter 11 vote on numerosity grounds if enough of these holders voted against the plan.

Accordingly, Fossil solicited an exchange offer with 90% consent threshold, with the threat that, if the solicitation was ineffective, it would look to implement an RP to achieve the same result. To effectuate this threat, Fossil, with the consent of the two majority institutional investors, (1) changed the governing law of the notes to English law, (2) created an English entity to guarantee the notes and serve as the “plan company,” and (3) appointed a retail investment advocate to represent the retail noteholders in order to ensure that the proceeding would meet general fairness standards applicable in U.K. restructuring proceedings. The consent offer did not reach the requisite 90% threshold, and so Fossil commenced the U.K. RP.

At the convening hearing for the U.K. RP, the High Court recognized that the (newly created) plan company was “plainly subject” to its jurisdiction under the Insolvency Act as a private limited company registered in the country, and that the strategy of incorporating a new English entity can be “‘good forum shopping’, which is permitted.”¹¹ The RP was uncontested, and it was ultimately sanctioned by the High Court on November 10, 2025, about a month after filing. Two days later, Fossil obtained, again on an uncontested basis, Chapter 15 recognition, granting domestic effect to the terms of the plan.

IV. IMPLICATIONS FOR CROSS-BORDER RESTRUCTURING

Fossil was not the first U.S.-based company to avail itself of an RP.¹² However, Fossil does appear to have been the first U.S. company to create a U.K. entity to serve as the plan company for an RP and successfully restructure U.S.-law governed notes (albeit after the governing law had been consensually amended to English law as part of the transaction). Through the RP, Fossil effectuated a targeted maturity extension, continued operations without any disruption or disclosure, and maintained its NASDAQ listing. While each of these outcomes could certainly be achieved through a prepackaged Chapter 11 case, there may have been more uncertainty and cost in a Chapter 11 case, particularly given the lack of visibility into the retail investors.

Importantly, though, Fossil faced only one dissenting creditor at both the U.K. sanction hearing and the Chapter 15 enforcement hearing—363 out of the 364 creditors present at the sanction hearing (representing 82% of the total value of the notes) voted in favor of the RP, and the lone objection to the Chapter 15 enforcement motion was resolved prior to the hearing.

In the face of creditor opposition, both U.S. and U.K. courts may be reluctant to grant the necessary relief. For instance, in the Mega Newco case, an originally Mexico-based debtor sought to implement a restructuring scheme in the U.K. and then have that proceeding recognized in the U.S. under Chapter 15.¹³ Although the U.S. court ultimately granted the corporation’s petition to recognize the U.K. proceeding, the court felt compelled to point out that:

[I]f [courts] were routinely to allow this structure in all cases, no matter what the circumstances, the ordinary predicates for Chapter 15 relief could be stripped of any meaning. Any debtor company could restructure its obligations anywhere it chose without even subjecting itself to a foreign proceeding [via creating a subsidiary] … [t]he laws of the chosen jurisdiction would govern a restructuring, no matter how those laws might affect the legitimate expectations of creditors and regardless of whether the debtor had chosen a particular jurisdiction for the purpose of favoring insiders or for other improper reasons.¹⁴

Similarly, in the recent Xinyuan case, Judge Bentley of the Southern District of New York Bankruptcy Court also signaled judicial skepticism toward recognition of foreign proceedings undertaken without creditor support. There, the court, in its decision to deny the debtor’s motion to dismiss its involuntary Chapter 11 case, noted that the absence of meaningful creditor support undermined the debtor’s argument that a Cayman Islands scheme of arrangement qualified as a foreign main proceeding for purposes of Chapter 15 recognition.¹⁵

The U.K. RP is still a relatively new instrument, and the case law continues to develop. Time will tell if the U.K. RP becomes a common alternative to Chapter 11 for U.S.-based companies, or whether it remains a rarity for specialized use case restructurings. But for now, Fossil has certainly made the U.K. RP a place to “watch.”

 

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¹ Restructuring plans were established under Part 26A of the Companies Act 2006 (U.K.) and are sometimes referred to as “Part 26A Restructuring Plans.”

² See Part 26A(2) of the Companies Act 2006 (U.K.); see also In the Matter of Virgin Atlantic Airways Limited [2020] EWHC 2376 [2020].

³ See Part 26A(3)(a) and (b) of the Companies Act 2006 (U.K.).

⁴ Id. at ¶ 15.

5 Upon recognition as a foreign main proceeding, (1) section 362 protects the domestic property of the debtor subject to adequate protection considerations, (2) the foreign representative may engage in transfers under sections 363, 549, and 552, and (3) the foreign representative may also exercise control over the debtor’s business under sections 363 and 552. See 11 U.S.C. § 1520. In order to maximize chances of success, creating jurisdictional hooks to the U.K. (e.g., changing governing law of the operative documents, incorporating a subsidiary in England as the plan company) are crucial.

⁶ Corporate Insolvency and Governance Act 2020, c. 901F (U.K.).

⁷ RPs have made their way through the U.K. courts in recent years, and cases suggest that the court continues to employ a rigorous judicial assessment of what constitutes fair distribution among the classes; see Corporate Insolvency and Governance Act 2020, c. 901G (U.K.).

⁸ 11 U.S.C. § 1129(b)(2)(B) provides that a junior claimholder cannot recover under the plan if it doesn’t provide for full recovery for more senior creditors. Although there are judicial exceptions to this rule, like the new value exception and “gifts” to more junior classes (depending on the jurisdiction), no cram down can occur if priority rules among stakeholders aren’t properly followed. Id.

⁹ “It is clear that the court does have jurisdiction to release claims against third parties who are not party to a plan, at least where it is necessary to do so.” Fossil (U.K.) Global Services Ltd, Re, 2025 WL 02934546 at 121 (2025).

¹⁰ A debtor in the U.K. has to apply through a separate moratorium process for a stay that initially lasts only 20 days (although extendable) and excludes all companies with capital-market debt over 10 million pounds. See Insolvency Act 1986, c. A21 (U.K.); Insolvency Act 1986, Schedule ZA1(13) (U.K.).

¹¹ Re Fossil (U.K.) Global Services Ltd [2025] EWHC 2741 (Ch)¶¶ 85, 127.

¹² See, e.g., In the Matter of CB&I U.K. Ltd. [2024] EWHC 398 (Ch) [2024]; In the Matter of Gategroup Guarantee Ltd [2021] EWHC 304 (Ch); Re PizzaExpress Financing 2 plc [2020] EWHC 2873 (Ch); Re Smile Telecoms Holdings Ltd [2022] EWHC 387 (Ch). The transactions in these cases ranged from (a) cramming down $1.3 billion in ICC judgments, (b) extending maturities in light of the pandemic, and (c) equitizing senior noteholders and cramming down other classes.

¹³ In re Mega Newco Ltd., 2025 WL 601463 at *3 (Bankr. S.D.N.Y. Feb. 24, 2025).

¹⁴ See id. at *6-7.

15 See In re Xinyuan Real Estate Company Ltd., Case No. 25-10745 (PB), 2026 WL 592250, at *11 (Bankr. S.D.N.Y. Mar. 3, 2026) (“It is undisputed that the Debtor’s “nerve center”—the place from which its management directs the company’s operations and makes its key decisions—is in the PRC, not the Cayman Islands. Other than having incorporated in the Cayman Islands and having chosen to restructure there, the Debtor has only minimal Cayman connections … nevertheless, precedent in this District would support a Cayman Islands COMI finding if two conditions were met—specifically, if (i) the Debtor obtained the overwhelming support of its Scheme creditors, and (ii) no party objected to recognition.”).