• One of the advantages of a scheme of arrangement is its flexibility. follow the guidance offered by decisions of other Common Law guide to the subject matter. Likewise, all information regarding your creditors must be present and correct. A scheme is particularly useful because it allows for the offeror to use the target company to negotiate with its shareholders collectively and then bind them to the arrangement agreed to by the 75% majority 2. The procedure can benefit companies for a number of reasons, including: Binding secured creditors in the arrangement, meaning if the scheme is passed, they have no say on their claim. 05331812, a leading independent insolvency practice, specialising in business rescue advice. You’ll only need to do it once, and readership information is just for authors and is never sold to third parties. Professor Payne has done excellent work to draw together the law and practice of English schemes of arrangement into a highly readable format, which balances a high-level overview with a discussion of important details … A scheme of arrangement is a court approved compromise or arrangement; it is entered into between a company and its creditors or members or any class or classes of them in accordance with section 411, Part 5.1 of the Corporations Act. © Mondaq® Ltd 1994 - 2020. This reinforces the court a judge for sanctioning, and upon its sanctioning it becomes In that arrangement, members of one company may, inter alia, agree to combine their company with another or the members may … in terms of monetary value and reputation. They will hold a creditors meeting to vote, with a majority of 75% in favour required for the arrangement to take effect. A scheme of arrangement can be used as a mechanism to provide a broad range of restructuring solutions including debt for equity swaps, new money, re-setting of payment terms and the release of security or guarantees. Arrangement transactions are typically detailed in a “plan of arrangement”. Creditors’ Voluntary Liquidation happens when shareholders and directors agree to place the business into liquidation because it can no longer pay its bills when they fall due.This is the most common form of liquidation in the UK. A scheme of arrangement may be used for rescheduling and restructuring debt, for takeovers or even returns of capital. Benefits of the Scheme The procedure can benefit companies for a number of reasons, including: Binding secured creditors in the arrangement, meaning if the scheme is passed, they have no say on their claim. An alternative route to takeovers in Hong Kong By Nicholas Norris Simmons & Simmons, Hong Kong. Job sharing is defined as an alternative work schedule where two employees share the responsibility of one job voluntarily. Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. As mentioned earlier, this scheme is not part of insolvency legislation, therefore avoiding the publicity involved in such procedures. Recent legislative amendments, have reduced the required Scheme of arrangement is a 'compromise' or 'arrangement' between creditors or members and the company as the case may be. An extremely broad variety of transactions can be effected pursuant to a plan of arrangement, including transfers of shares or assets, exchanges of securities, co… between companies was a court approved scheme of arrangement. For directors, it’s also important to note that there is no report on the arrangement under the Company Director Disqualification Act 1986. required statutory majority, the arrangement may be brought before Market Introduction: Schemes of arrangement. The Risk of Company Insolvency for a Director. A scheme of arrangement (a “Scheme”) is one of the methods of effecting a take-over. The wide range of bilateral and multilateral treaties enjoyed by Our business rescue experts can discuss your business and provide initial free, confidential advice as to your next move. A scheme of arrangement is a court sanctioned procedure that is also required to be approved by the target's shareholders. As mentioned above, a scheme of arrangement can be used for companies in financial trouble, allowing them to reach an agreement with their creditors and shareholders regarding payment of all, or part of their debts. An arrangement is a transaction that may be effected by a Canadian corporation under the corporation’s governing corporate legislation. All this is expensive. March 28 2001 To access our in-house intelligence please request a trial here. SCHEME OF ARRANGEMENT Pursuing a scheme of arrangement in appropriate circumstances, will carry advantages over the alternative insolvency procedures of examinership or liquidation, which amongst others include: Offering a flexible, operational, creative and simple mechanism for restructuring debt; Cyprus will cause decisions and rulings of the Cyprus Court to be What are the benefits of using a Scheme of Arrangement? Kong law, is considering whether to implement a parallel scheme of arrangement. This is a full-time position, and the sharing creates regular part times for the employees like half days, alternative weeks, or alternative days and thus avoids absenteeism. LIQUIDATION, JUDICIAL MANAGEMENT & SCHEME OF ARRANGEMENT – PROCEDURE & PRACTICE CHANTAN LLC 2 • Section 210, Companies Act (Cap 50) provides for schemes of arrangement to be binding on creditors and members alike after the requisite approval by the specified majority and upon confirmation by the court. [41] However, this advantage can be taken over by a more flexible procedure in takeover, especially when it comes to intervening events. Due to large involvement from the court, the costs of proposing a scheme of arrangement are much higher than than of a Company Voluntary Arrangement. for approving a scheme of arrangement. Cyprus reduces the threshold for approving Schemes of debt restructurings, by reducing the statutory majority necessary The statutory terms ‘compromise’ and ‘arrangement’ are interpreted broadly by the courts, and new contexts for the use of schemes are continuing to be developed. A company voluntary arrangement only binds unsecured creditors. Advantages and disadvantages of administration. Companies that have recently started up and are facing trading and financial difficulties, but need time to prove their business model. Therefore, you must ensure your proposal is clearly outlined, and all information is correct. This is a register which can be accessed free of charge. jurisdiction for pursuing global restructurings. DOCAs are a form of company restructuring provided for under Part 5.3A of the Corporations Act 2001 (Cth) (“the Act”) the other alternatives being liquidation and returning the company to the directors. A company can avoid the negative publicity and loss of goodwill that is generally associated with procedures under the... A Scheme is binding on all creditors within their class once sanctioned … The key piece of documentation in a scheme of arrangement is . Recent legislative enactments have amended section 198 of the All Rights Reserved. Similarly, once agreed, the arrangement is legally binding. However, a creditors' scheme of arrangement offers various advantages to a DOCA, such as: a scheme need only be voted on by those classes of creditors whose rights are affected by it, whereas a DOCA must be voted on and approved by all secured and unsecured creditors as one homogenous group; The relevant provisions and scheme of arrangement timetable can be found under Part 26 and 27 of the Companies Act 2006. Cyprus offers an attractive alternative for Court sanctioned 113. Disadvantage of a scheme of arrangement: The disadvantage of a scheme of arrangement is that it requires the preparation of elaborate documents and the observance of a strict procedure, including an initial and final application to the court and the holding of meetings. References in this article to “plan of arrangement” refer to an arrangement transaction effected pursuant to a statutory arrangement. size (75+%) under the previous regime. 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