Scheme of Arrangement

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Scheme of Arrangement

A scheme of arrangement is a flexible method of restructuring company debt with a one or more classes of creditor - whilst still trading.   As a court approved procedure, schemes of arrangement can preclude the publicity and loss of goodwill sometimes associated with formal company restructuring and there is no need for a report to be made on directors under the Company Directors Disqualification Act.  A standstill arrangement may be possible with key creditors whilst talks take place.

Due to their legality, it is advisable to engage experienced, licensed insolvency practitioners such as ourselves to accomplish a scheme of arrangement - Call 0121 201 1720

Scheme of Arrangement Process

The licensed insolvency practitioner will oversee the scheme of arrangement process, beginning with negotiating the ‘debt comprise’ for the creditor scheme of arrangement proposal.  After this point the scheme of arrangement process characteristically takes 5 weeks.

The court gives permission for meetings to convene and ensures creditor classes are correct at a class hearing.  A creditor class “must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest”.

75% member approval of a class of creditors is required with regards to the scheme and a special resolution may be needed if the scheme of arrangement compromises company share capital.  

Upon class approval the court may sanction the creditor scheme of arrangement at a sanctions / fairness hearing.   When sanctioning the court needs to be satisfied that:  statutory requirements are complied with, classes of creditors were correctly identified, each class was fairly represented, the majority acted in the interest of the class and that it would be reasonable for a creditor to approve the scheme with the given information.

When a scheme of arrangement is court sanctioned it binds all creditors of a class, even those who may come forward in the future.  Finally, a copy of the court order is sent to the registrar of companies and the scheme of arrangement becomes operative.

Please call 0121 201 1720 for specific scheme of arrangement advice.

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