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McArthur Group Limited, Oaktree Packaging Company Limited, and McArthur Cyclone Limited , Q&A for creditors meeting

Q: Why have the administrators prepared the proposals?

A: We have prepared the proposals to explain why the companies were put into administration, provide a brief history and set out our proposals for achieving the purpose of the administration.  The proposals also include details of the Companies’ assets and liabilities, and say how likely we are to be able to pay each class of creditor.

Q: Why is the company in administration?

A: Full details can be found in section 3 of the joint administrators’ proposals. A summary of which is provided below.

The business had been loss making for a number of years, partly due to the difficulties in the markets it operated in and partly due to operational inefficiencies. Performance improvements were being made through the cessation of loss making activities and operational changes, however cash pressure continued to build through the traditionally quieter winter period in late 2013.

As a result, corporate finance advisors were engaged in January 2014 to seek external investment or finance. This process resulted in the refinance of the term debt to Tanistry (an SPV controlled by RCapital) in March 2014. Further restructuring was undertaken by the Companies following this refinancing.

Trading conditions remained difficult during the early part of 2014, and creditor pressure became unsustainable in April 2014. The Companies therefore engaged PwC on 23 April 2014 to consider the options available for the business and to undertake a contingency planning exercise should the Companies need to enter an insolvency process.

The contingency planning was overtaken by the filing of a winding up petition against McArthur Group by a trade creditor.

In view of the above, the directors took the decision to file notices of intention to appoint administrators over McArthur Cyclone Limited and Oaktree Packaging Company Limited on 2 May 2014.

Subsequent to the presentation of the winding up petition, a proposal was received from RCapital to acquire substantially all of the business and assets conditionally on the acquisition being made immediately following proposed administration appointments.

Given the financial position of the Group and the condition included in the offer from RCapital, it appeared highly likely that the Companies would enter an insolvency process and therefore negotiations took place between RCapital and the proposed administrators to arrive at a commercially acceptable transaction.

The appointment of administrators over the Companies subsequently took place at 3:55pm on 8 May 2014, and a transaction was completed with Thorents (an SPV owned by RCapital) on the same day. Thereafter, Thorents changed its name to MGL Distribution Limited.

Q: What have the administrators done so far?

A: On the day of our appointment, the majority of the business and assets were sold to Thorents Limited. There were a number of assets excluded from the sales agreement and we are in the process of realising these assets. For further information, please refer section 3 of the joint administrators’ proposals, under the section ‘How we’ve managed and financed the Companies’ affairs and business’.

Q: What are the administrators proposing?

A: According to the Insolvency Act 1986, the purpose of an administration is to achieve one of these objectives:

(a) rescuing the company as a going concern, or if that is not possible or if (b) would achieve a better result for the creditors than (a)

(b) achieving a better result for the company’s creditors as a whole than would be likely if the Company were wound up (without first being in administration), or finally, if that is not possible

(c) realising the company’s assets to pay a dividend to secured or preferential creditors.

In this case, we’re following (b) as it was not reasonably practical to rescue the Companies as going concerns.

Further detail can be found in section 4 of the joint administrators’ proposals.

Q: Is there going to be a meeting of creditors?

A: Yes.  Creditors’ meetings are to be held on Monday 14 July 2014 at the Thistle Bristol City Centre, The Grand, Broad Street, Bristol, BS1 2EL at the following times:

  • McArthur Group Limited - 11.00
  • Oaktree Packaging Company Limited – 12.30
  • McArthur Cyclone Limited – 13.00

All known creditors have been sent notice of the creditors’ meeting together with proxy forms and relevant instructions for voting for each respective company.  These notices and relevant documents are attached to the proposals which are available to download from this website and creditors have been notified of the password required in the latest correspondence from the Administrators.

Q: Who will be at the creditors’ meeting?

A: One of the Administrators or a person nominated by them in writing will chair the meeting and answer creditors’ questions. The directors do not have to attend unless required to do so by the Administrators.

Q: What will happen at the creditors’ meeting?

A: It will be assumed that creditors will already have received and read the Administrators’ proposals. The meeting will give creditors an opportunity to put questions to the Administrators. The meeting will then consider and vote upon any modifications that individual creditors might put forward, following which a vote will be taken upon the whole proposals as modified.

Various other resolutions might be considered, in particular those dealing with the basis of the Administrators’ remuneration, unpaid pre-appointment costs and the appointment and composition of any creditors’ committee.

Q: Am I obliged to attend the creditors’ meeting?

A: No. The law recognises that creditors are not always able to attend.  You can ask someone to attend as proxy and vote on your behalf, or you can ask the chairman of the meeting to vote on your behalf, or you can choose not to be represented. If you do not attend in person or appoint a proxy your claim and entitlement to a dividend will not be affected.

Q: How do I ensure that my vote counts at the meeting?

A: In order to vote, a creditor must have submitted written details of his claim and the chairman must have admitted that claim for voting purposes following the guidelines below. These details need to be submitted to the Administrators no later than 12.00 noon on the business day before the meeting (Rule 2.38(1)). You might also need to lodge a proxy.

The chairman can admit a claim for voting purposes even though it was submitted late if he is satisfied this was due to reasons beyond the creditor’s control (Rule 2.38(2)).

Q: Do I need to lodge a proxy form?

A: If you are an individual creditor and not a corporate body (such as a limited company) you may vote by simply attending the meeting provided you have lodged a claim as explained above.

If you do not want to attend the meeting, you may nominate someone else, or the chairman of the meeting, to vote for you. They can vote either on your instructions or at their discretion. Do, however, remember that the chairman will be one of the Administrators or their staff and you might wish to consider specifying clearly how he should vote.

The enclosed proxy form or a substantially similar form must be completed then signed by the creditor or by someone authorised by him and the nature of the person's authority to sign should be stated (Rule 8.2). If the creditor is a company, a director should normally sign. The proxy form must then be submitted at or before the meeting.

Where the chairman holds a proxy which includes a requirement to vote for a particular resolution and no other person proposes that resolution, the chairman must propose it unless the chairman considers that there is good reason for not doing so, and, if the chairman does not propose it, the chairman must as soon as reasonably practicable after the meeting notify the principal of the reason why not (Rule 2.36(3)).

Please remember that if the debt is owed to a limited company or other corporation and you wish to attend and vote at the meeting, you should complete and return the proxy form even if you are a director of the company. (Alternatively you can produce at the meeting a resolution of the directors authorising you to represent that company.) (Rule 8.7).

Q: Who decides whether my claim ranks for voting purposes?

A: The chairman can accept or reject the whole or any part of your claim (Rule 2.39(1)). If he is in doubt whether your claim should be admitted, he should mark it as objected to and allow you to vote. However, if the objection is sustained, your vote will be declared invalid (Rule 2.39(3)). If your vote was critical to the outcome of the meeting, this could change the resolutions that were passed and/or result in a further meeting (Rule 2.39(4)).

Q: What happens if I disagree with the chairman’s decision?

A: You are entitled to appeal to the court for an order reversing the chairman’s / Administrator’s decision on your claim provided you do so within 21 days of the meeting (Rule 2.39(5)). If the court does reverse the chairman’s / Administrator’s decision it can order that another meeting be held or make such other order as it thinks just (Rule 2.39(4)).

Creditors also have the right to appeal to the court if they believe that the administration unfairly harms their interests (Paragraph 74(1) Sch.B1 IA86).

It is recommended that you seek legal advice about the merits of taking these steps in any particular circumstances.

Q: How do I calculate my claim for voting purposes?

A: Votes are calculated according to the amount of a creditor’s claim as at the date on which the Company entered administration, less any payments that have been made to him after that date in respect of his claim and any adjustments by way of set-off in accordance with Rule 2.85 as if that Rule were applied on the date that the votes were counted (Rule 2.38(4)).

Q: What majorities are needed to approve resolutions?

A: A resolution to approve the proposals or any modification to them is passed at the creditors’ meeting if supported by a majority in excess of 50% in value of the creditors voting on the resolution (Rule 2.43(1)).

Any resolution is invalid if those voting against it include more than 50% in value of the creditors to whom notice of the meeting was sent and who are not, to the best of the chairman’s / Administrator’s belief, connected with the Company (Rule 2.43(2)).

Q: What happens if I cannot yet quantify my claim with certainty?

A: A creditor cannot vote in respect of a debt for an unliquidated amount or any debt whose value is not ascertained, unless the chairman / Administrator agrees to put on the debt an estimated minimum value for voting purposes (Rule 2.38(5)).

Q: What happens if my debt is wholly or partly secured?

A: A secured creditor whose debt is wholly or partly secured is entitled to vote only in respect of the balance (if any) of his debt after deducting the value of his security as estimated by him. However, if the Administrators have made a statement under Paragraph 52(1)(b) Sch.B1 IA86 and an initial creditors’ meeting has been requisitioned by creditors under Paragraph 52(2) Sch.B1 IA86, a secured creditor is entitled to vote in respect of the full value of this debt without any deduction for the value of his security (Rule 2.40).

Q: What happens if I hold a negotiable instrument?

A: A creditor shall not vote in respect of a debt on or secured by a current bill of exchange or promissory note unless he is willing:

a) to treat the liability to him on the bill or note of every person who is liable on it antecedently to the Company and against whom a bankruptcy order has not been made (or in the case of a company, which has not gone into liquidation) as security in his hands; and

b) to estimate the value of the security and, for the purpose of his entitlement to vote (but not for dividend), to deduct it from his claim (Rule 2.41).

Q: What happens if I am a creditor under a hire-purchase, conditional sale agreement or leasing agreement?

A:An owner of goods under a hire-purchase or chattel leasing agreement, or a seller of goods under a conditional sale agreement is entitled to vote in respect of the amount of the debt due and payable to him by the Company on the date the Company entered Administration. In calculating the amount of any debt for this purpose, no account shall be taken of any amount attributable to the exercise of any right under the relevant agreement, so far as the right has become exercisable solely by virtue of: -

  • the making of an administration application
  • a notice of intention to appoint an administrator or any matter arising as a consequence, or
  • of the Company entering administration (Rule 2.42).

Q: Am I bound by the Administrators’ proposals if they are approved at the meeting?

A: The Administrators’ proposals, when approved by the creditors’ meeting, will dictate how the Company’s affairs will be conducted in future and how creditors’ claims will be addressed.

Once approved the proposals are binding on all creditors, including not present or represented at the meeting. For this reason, it is important that creditors properly consider the proposals and decide whether and how they wish to vote.

Q: What are the functions of the creditors’ committee?

A: In addition to any functions conferred on the creditors’ committee by any provision of the Insolvency Act 1986, the creditors' committee shall assist the Administrator in discharging his functions, and act in relation to him in such manner as may be agreed from time to time (Rule 2.52(1)).

In particular, it has the duty to agree the basis of the Administrator’s remuneration (Rule 2.106(3) and approve the payment of unpaid pre-administration costs (Rule 2.67A)).

Q: How is the creditors’ committee formed?

A: The creditors' committee is established at a creditors' meeting. It is not obligatory but the creditors decide whether they wish to have one (Paragraph 57(1) Sch.B1 IA86).

The committee must consist of at least three and not more than five creditors of the company elected at the meeting (Rule 2.50(1)).

Any creditor of the company is eligible to be a member of the committee, so long as his claim has not been wholly disallowed for voting purposes or wholly rejected for the purposes of distribution or dividend and the claim is not fully secured (Rule 2.50(2). A body corporate may be a member of the committee, but it can only act as such through a properly appointed representative (Rule 2.50(3)).

No person may act as a member of the committee unless and until he has agreed to do so (Rule 2.51(2)). Unless the relevant proxy or authorisation contains a statement to the contrary, such agreement may be given by the creditor’s proxy-holder or, in the case of a corporation, by its duly appointed representative present at the meeting establishing the committee (Rule 2.51(2)).

A person acting as a committee member's representative must hold a letter of authority entitling him so to act (either generally or specially) and authenticated by or on behalf of the committee-member (Rule 2.55(2)).

No member may be represented by:

  • another member of the committee
  • a person who is at the same time representing another committee member
  • a body corporate
  • an undischarged bankrupt
  • a disqualified director, or
  • a person who is subject to a bankruptcy restrictions order (including an interim order), a bankruptcy restrictions undertaking, a debt relief restrictions order (including an interim order) or a debt relief restrictions undertaking (Rule 2.55(4)).

No person shall on the same committee act at one and the same time as representative of more than one committee-member (Rule 2.55(5)).

The creditors' committee does not come into being, and accordingly cannot act, until the Administrator has issued a certificate of its due constitution (Rule 2.51(1)).

Q: How do I complete my proxy form if I am not attending the creditors’ meeting?

A: If you are not attending the creditors’ meeting or sending a representative you may still vote by appointing the chairman as your proxy holder; to do so insert the words “chairman of the meeting” in the space for the proxy holder’s name. The chairman will be one of the administrators or an employee of the administrators duly authorised to act as chairman. You should then indicate your voting instructions for each resolution. Please also ensure that the proxy is signed by a duly authorised representative of a creditor and his or her name and relationship to the creditor / position is stated.

Q: The amount I’m owed is more than what’s showing on the Statement of Affairs

A: At this stage we are unable to investigate any discrepancies. However, from past experience these usually arise because final invoices have not been accounted for. You should submit your claim based on the actual debt which is outstanding. Once we are nearer to being in a position to pay a dividend to creditors, then your claim will be assessed on the information you have provided to support your claim.

Q: What do I need to do to claim the amount I’m owed?

A: Fill in a proof of debt form (available to download from this website) and send it, together with full supporting evidence of the debt due, to Lee Panther at the Leeds address above.

You must ensure that you complete the correct claim form for the relevant company (i.e. McArthur Group Limited, McArthur Cyclone Limited or Oaktree Packaging Company Limited).

Details of the anticipated level of dividends based on current information for each company are included in the Administrators’ proposals which are attached to this website.

Q: What evidence should I provide to support my claim?

A: In most cases one or more of the following will be sufficient: invoices, statements, purchase orders, signed contracts, signed agreements.  The more evidence you can provide at an early date, the easier and more cost effective the claims agreement process will be in due course.

Q: What else do I need to tell you about?

A: Whether you have recovered any of the debt due to you under a retention of title claim, or by any other means, as this will reduce the amount owed to you and must be deducted from your claim.

Any change of address to ensure that you receive all correspondence from us.

Any change of name to ensure that any future dividend payment will be paid to the correct person/company.  (NB: documentary evidence of the change will be required).

Please note that a change in your details will need to be notified to us in writing for security purposes.

Q: I’ve submitted my claim – what happens now?

A: Your claim will be held on file until such a time as we decide that there are sufficient funds available to pay a dividend to unsecured creditors, at which point the claims agreement process will be started.  We will not know this for some time, and updates will be provided as to the position in the Administrators’ six-monthly progress reports to creditors (see below “How often can I expect to hear from the Administrators”).

Q: I haven’t received an acknowledgement of my claim?

A: We do not routinely acknowledge receipt of claims as it is not cost effective to do so.  Saving costs in this way maximises any return to creditors. 

Q: How much am I expected to recover from my claim?

A: We think that there will be a distribution to unsecured creditors of all three companies. However, we are not yet in a position to provide an accurate estimate of the dividend that will be paid because of the uncertain final level of claims from unsecured creditors and uncertainties over the final level of asset realisations as discussed later in this report. Dividend levels will also differ between the creditors of each separate company.

However, we would expect any dividend to range as follows:

McArthur Group Limited:                                            0 p – 15 p in the £

McArthur Cyclone Limited:                                        0 p – 2 p in the £

Oaktree Packaging Company Limited:                    0 p – 25 p in the £

We currently think that preferential and secured creditors will be repaid in full.

Q: I would like to claim retention of title on goods supplied to the Companies before the administration.

A: MGL Distribution Limited is dealing with any retention of title claims in the first instance.  If you believe you have a retention of claim, please contact Martin Elgood or Jordon Tippett at mgldistributionltd@gmail.com or on 0117 943 0526.

Before your claim can be reviewed, you will need to completed and return a questionnaire, which will be provided by MGL Distribution Limited, together with supporting documentation.  You will also need to arrange to identify and count your goods at the relevant branches.

Q: I want to collect goods I supplied to the Group prior to the administration.

A: You are unable to collect goods you supplied prior to the administration without proving you have a valid retention of title.  Please contact MGL Distribution Limited in this regard, as set out in the above question ‘I would like to claim retention of title on goods supplied to the Companies before the administration’.

Q: How can the administrator sell stock that could be subject to retention of title?

A: The title to stock subject to valid retention of title claims is not sold and does not transfer to the buyer, however it is standard in administration sales that the buyer is normally involved in dealing with such claims under the terms of the sale agreement, therefore you should contact MGL Distribution Limited in the first instance to process your claim. However, should you have any concern regarding the treatment of your claim, you should contact a representative of the administrators, Lynsey Harris at lynsey.harris@uk.pwc.com

Q: I’m a creditor, but I haven’t received any correspondence from the Administrators?

A: Please contact either the creditor helpline on 0113 289 4929 or write to Lee Panther, at PricewaterhouseCoopers LLP, Benson House, 33 Wellington Street, Leeds, LS1 4JP.

Q: How often can I expect to hear from the Administrators?

A: Under UK insolvency legislation, the Administrators must report to creditors on the progress of the administration within one month of every six month period from the date of appointment. In the interests of keeping costs to a minimum and to maximise the return to creditors, we do not routinely answer ad hoc queries for updates outside the statutory reporting process.

Q: What is a statement of affairs?

A: A statement of affairs is a summary of the financial position of the business at the date of the insolvency which is prepared by the directors of the company.  A copy of the statement of affairs for each of the companies can be found on the website. 

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