AMIGO Loans will “inevitably” go into administration and leave 70,000 complainants empty-handed unless the company is allowed to put a cap on compensation payouts, its lawyers have argued.

The lender was in the High Court yesterday to seek approval for its settlement scheme, which has already been backed by a vote of creditors.

Its plan is opposed by the Financial Conduct Authority (FCA), which says the proposals would unfairly protect shareholders at the expense of people with compensation claims.

The company, based on Commercial Road, Bournemouth, employs around 400 people.

Robin Dicker QC, representing Amigo, told the court: “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.”

He said secured creditors would have claims totalling around £320million if the company went into administration.

The company’s assets would raise between £312m-£325m and the insolvency process would cost some £37m, wiping out the hope of money for unsecured creditors such as those with mis-selling claims.

Questioning Mr Dicker, Mr Justice Miles queried whether the company would really be unable to continue if its scheme was not approved.

“The concern I have is that there’s a sort of Sword of Damocles element about this – that a company seeking the sanction of the scheme comes to the court and says ‘We don’t really have choice, if you don’t approve it we’ll go into insolvency’,” he said.

“It seems to me that the court is entitled to explore that by reference to objective fact and come to a conclusion about whether that’s likely to happen.”

Tom Smith QC, for the FCA, told the court: “Our central point of objection to the scheme is that it involves an unfairly favourable treatment of shareholders relative to the treatment of the redress creditors.”

He said the proposals involved writing off “hundreds of millions of pounds” owed to complainants, while the shareholders would keep their equity.

“Our primary submission is that there is simply no proper justification for the shareholders retaining all of the equity and the obvious question is ‘Why isn’t the group giving some or all of the equity to the redress creditors?’ and no real answer to that question has been provided,” he added.

He said Amigo had presented the situation as a “binary choice between this scheme and insolvency”.

“In our submission, that’s simply a false choice. It doesn’t reflect the reality of the situation and that in reality the alternative to the scheme in its present form is a modified version of this scheme or an alternative scheme,” he added.

Mr Justice Miles said he would consider his decision and was likely to give his judgement within days.