A scheme of arrangement (or a "scheme of reconstruction") is a court-approved agreement between a company and its shareholders or creditors (e.g. lenders or debenture holders). It may affect mergers and amalgamations and may alter shareholder or creditor rights.
Full Answer
What is a scheme of arrangement for a company?
Companies may enter into a scheme of arrangement whereby the court sanctions a compromise or arrangement which is entered into by the members or creditors of a company. If the scheme of arrangement goes through, the company will get £25 million of long-term capital.
What is a scheme of arrangement (scheme of reconstruction)?
Last updated on July 17, 2019. A scheme of arrangement (also known as a “scheme of reconstruction”) is an agreement, between a company in financial distress and its creditors, to assist the company to fulfil its debt obligations.
When did the scheme of arrangement for a company last update?
Last updated on November 29, 2018. A scheme of arrangement (also known as a “scheme of reconstruction”) is an agreement, between a company in financial distress and its creditors, to assist the company to fulfil its debt obligations. A scheme of arrangement works by restructuring the company’s debts and varying creditors’ rights.
What is a schema of arrangement?
Schemes of arrangement are used to execute arbitrary changes in the structure of a business and thus are used when a reorganisation cannot be achieved by other means. They may be used for rescheduling debt, for takeovers, and for returns of capital, among other purposes.
What is meaning of scheme of arrangement?
A Scheme of Arrangement is a process used by a company in financial difficulty to reach a binding agreement with its creditors to pay back all, or part, of its debts over an agreed timeline.
What happens in scheme of arrangement?
In general terms, a scheme of arrangement is a shareholder and court-approved statutory arrangement between a company and its shareholders that becomes binding on all shareholders by operation of Part 5.1 of the Corporations Act.
What is scheme of arrangement UK?
A scheme of arrangement is a formal statutory procedure under Part 26 of the Companies Act 2006 under which a company may enter into a compromise or arrangement with its members or creditors (or any class of them).
What are the parts of a scheme of arrangement?
This Composite Scheme of Arrangement is divided into the following parts: PART-1: Preliminary – Definitions. PART-2: Share Capital and Rationale. PART-3: Transfer and vesting of Demerged Undertaking of Greenply to Greenlam.
How long does scheme of arrangement take?
As a result, a scheme typically takes about four months to implement from the date of the bidder's first approach to target, but can be up to six months or longer if significant due diligence is conducted before the scheme is announced or substantial regulatory approvals are required such as FIRB and ACCC.
Is scheme of arrangement a court order?
Scheme of Arrangement means a scheme of arrangement, share for share exchange or analogous procedure. Scheme of Arrangement means a scheme of a compromise or arrangement sanctioned by a court under Part VII of the Act, as may be amended or similar procedure under a succeeding law or regulation.
What is a court-approved scheme of arrangement?
A scheme of arrangement (or a "scheme of reconstruction") is a court-approved agreement between a company and its shareholders or creditors (e.g. lenders or debenture holders). It may affect mergers and amalgamations and may alter shareholder or creditor rights.
How do you pass a scheme of arrangement?
A scheme requires approval by at least 75% in value of each class of the members or creditors who vote on the scheme, being also at least a majority in number of each class.
Who can apply for a scheme of arrangement?
Firstly, an applicant (i.e. the company's creditor, member, liquidator or judicial manager, where applicable) will have to file an application in Court pursuant to s. 366 for leave to summon a meeting of the company between its creditors and/or members.
Is a scheme of arrangement an insolvency process?
What is a scheme of arrangement? A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors. It is not actually an insolvency procedure and can be used by both solvent and insolvent companies to agree any issue or matter with its creditors and/or members.
How do you pass a scheme of arrangement?
A scheme requires approval by at least 75% in value of each class of the members or creditors who vote on the scheme, being also at least a majority in number of each class.
Why do schemes of arrangements?
Schemes of arrangement are used to execute arbitrary changes in the structure of a business and thus are used when a reorganisation cannot be achieved by other means. They may be used for rescheduling debt, for takeovers, and for returns of capital, among other purposes.
What is approved scheme of arrangement?
APPROVAL OF SCHEME: Pursuant to Section 230 of CA, 2013, a scheme of arrangement is required to be approved by a majority of persons representing 3/4th in value of the creditors, or class of creditors or members or class of members, as the case may be, either voting in person or by proxy or by way of a postal ballot.
What is scheme of arrangement share?
Generally speaking, a scheme of arrangement involves a compromise between a company and its shareholders pursuant to which the shareholders agree to transfer their shares, for consideration, to the company seeking to acquire control.
What is a Scheme of Arrangement?
A scheme of arrangement is an agreement, between a company in financial distress and its creditors, to assist the company in fulfilling its debt obligations.
How can a scheme of arrangement be overridden?
A scheme of arrangement can be overridden only by proposing an entirely new one and undergoing the whole approval process again.
Why do distressed companies need rescue financing?
To successfully implement a scheme of arrangement, a company typically needs a fresh capital injection to continue operations and pay off short-term debts. However, distressed companies often face significant difficulties in obtaining rescue financing (i.e. essential loans) due to the risk of the restructuring failing, and the rescue financiers being unable to recover their loans. The lack of such financing then makes it much harder to maintain the company’s operations and would itself reduce the chances of a successful restructuring.
What is a scheme subject to?
The scheme is subject to the court’s supervision and sanction. This means that a scheme will be binding on all creditors if the court approves the scheme. This is even if not all the creditors approve of the scheme. This article will cover:
What is the alternative method of arrangement?
The alternative method: A “pre-packed” scheme of arrangement . Under the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), there is also a faster and less costly method of implementing a scheme of arrangement.
What is a scheme in a court case?
The scheme is one which a man of business or an intelligent and honest man, being a member of the class concerned and acting in his interest, would reasonably approve. Where necessary, the court has the power to call for a new creditors’ meeting and order a re-vote before it decides whether or not to approve the scheme.
Is a scheme of arrangement preferable to judicial management?
A scheme of arrangement is often preferable to a judicial management in various situations. These include: Where the company wishes to avoid publicity of its financial woes; Where the company directors are unwilling to cede control over the company to a judicial manager; and/or. Where the company and/or the creditors seek to leverage ...
What is a Scheme of Arrangement?
A Scheme of Arrangement helps a company in the restructure of its debt, and aids recovery from financial distress. It is not an insolvency process and is utilised under the Companies Act 2006 rather than insolvency legislation, but it must still be sanctioned by court process.
What is the Scheme of Arrangement process?
Once a Scheme of Arrangement has been identified as a viable tool for a company, negotiations take place with regard to restructuring its debt. The court calls a ‘Class Hearing’ to establish that the classes of creditor are correct.
What are the benefits of using a Scheme of Arrangement?
A company can avoid the negative publicity and loss of goodwill that is generally associated with procedures under the Insolvency Act, 1986
Examples of Scheme of Arrangement in a sentence
The Board of Directors of the Company, on July 7, 2010 announced and approved a Scheme of Arrangement (‘the Scheme’) between Infomedia 18 Limited and Network 18 Media & Investments Limited (‘Network 18") and their respective shareholders.
More Definitions of Scheme of Arrangement
Scheme of Arrangement or “Scheme” means this Composite Scheme of Arrangement as submitted in the present form to the High Courts, with any modification (s) approved or imposed or directed by the High Courts or made pursuant to Clause 34 of this Scheme.
What Is A Scheme of Arrangement?
Why Undertake A Scheme of Arrangement Over Judicial Management?
- A scheme of arrangement is often preferable to a judicial managementin various situations. These include: 1. Where the company wishes to avoid publicity of its financial woes; 2. Where the company directors are unwilling to cede control over the company to a judicial manager; and/or 3. Where the company and/or the creditors seek to leverage the possible orders that the court ma…
Process of Effecting A Scheme of Arrangement in Singapore
- The following infographic provides a quick summary of the application process for a scheme of arrangement: (Click on the image to download it in a new tab.)
effect(s) of The Scheme of Arrangement
- The effect(s) of the scheme of arrangement will depend on its terms. For example, rights of creditors can be affected only if the scheme has expressly provided for this. The same applies to the alteration of third-party rights.
Alteration of A Scheme of Arrangement
- Once sanctioned by the court, a scheme of arrangement is binding on all parties to the scheme and cannot subsequently be altered. This is even if the company’s shareholders and creditors agree to alter the scheme. A scheme of arrangement can be overridden only by proposing an entirely new one and undergoing the whole approval process again.
Termination of A Scheme of Arrangement
- The scheme may include terms on how it is to be terminated. For example, the terms of a scheme of arrangement may state that the scheme ends: 1. Upon complete implementation of the scheme; 2. After a stipulated period of time; and/or 3. At the scheme manager’s discretion. — Schemes of arrangement grant companies in financial distress temporary relief from their debt obligations. A…