LOAN company Amigo could go into administration after losing a crucial court case.

The Bournemouth-based guarantor lender – which employs around 400 people – says it is reviewing its options after the High Court refused its proposals to limit compensation in mis-selling cases.

Amigo had told the High Court last week that it would “inevitably” go into administration and leave 70,000 complainants empty-handed unless the court approved its proposals to limit compensation payouts.

The scheme, which could limit payouts to around 10p in the pound, had already won the backing of creditors who took part in a vote. 

But Amigo's scheme was opposed by the Financial Conduct Authority (FCA), which said the proposals would unfairly protect shareholders at the expense of people with compensation claims.

In his judgement, Mr Justice Miles accepted the FCA’s argument that rejecting the Amigo’s proposals would “probably not lead to the imminent insolvency of the group”.

He said the creditors who backed the scheme "lacked the necessary information or experience" to assess the alternatives.

He urged Amigo's directors to continue efforts to promote a "suitable restructuring".

A statement from Amigo said on Tuesday morning: “Amigo announces that the High Court has not approved the scheme despite the overwhelmingly positive creditors' vote.”

READ MORE: Amigo in High Court over compensation payout scheme

It added: “The board is reviewing all options including an appeal. A further update will be given in due course.

“To ensure equal treatment of customers with redress claims, Amigo announced on December 21, 2020 that it was stopping the ongoing payment of redress claims as set out in the announcement of that date, and that position will continue.

READ MORE: Amigo faces administration amid court challenge from Financial Conduct Authority over mis-selling payouts

Amigo chief executive Gary Jennison said: "Amigo is incredibly disappointed that the Scheme has not been approved despite the 74,877 customers who voted in support of the scheme, representing over 95 per cent of those who voted. We are currently reviewing all our options and will provide an update at the earliest opportunity."

Robin Dicker QC, representing Amigo, told the court last week: “In our submission it’s inevitable that if this scheme is not sanctioned, Amigo Loans Limited will go into administration. That is what the board has resolved will happen and in that event, unsecured customers with redress claims will not receive anything.”

But Mr Justice Miles said in his judgement that he was “not persuaded” that he could “properly place any reliance” on the vote backing Amigo’s proposals.

He said turnout was less than nine per cent of the scheme’s creditors.

The “financially unsophisticated consumer” was given the impression that insolvency would be the “automatic and immediate consequence” of rejecting Amigo’s proposals, he said.

“Creditors could therefore decide to accept something (10 per cent with a chance of something more or less than that) or nothing,” he said.

He added: “I have accepted the submissions of the FCA that the redress creditors lacked the necessary information or experience to enable them properly to appreciate the alternative options reasonably available to them; or to understand the basis on which they were being asked by Amigo to sacrifice the great bulk of their redress claims, while the Amigo shareholders were to be allowed to retain their stake.”