Corporate insolvency for dispute resolution practitioners: schemes of arrangement
Corporate insolvency for dispute resolution practitioners: schemes of arrangement

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Corporate insolvency for dispute resolution practitioners: schemes of arrangement
  • Note
  • What is a scheme of arrangement?
  • The effect of a scheme on legal proceedings
  • How is a scheme implemented?

This Practice Note refers to:

  1. the Insolvency Act 1986 as IA 1986, and

  2. the Companies Act 2006 as CA 2006

Note

This guide is a summary of schemes of arrangement and their impact on legal proceedings from a dispute resolution perspective (for full details, see: Schemes of arrangement—overview). Schemes are particularly complex and there have been occasional instances where they have not been approved by the courts.

What is a scheme of arrangement?

A scheme of arrangement is a court-sanctioned compromise between a company and its creditors or members. The scheme process allows such a compromise to be implemented without the support of all of the interested parties, if the requisite majorities are attained.

Because of their flexible nature, schemes are often used in complex restructurings and have been successfully used in several high-profile restructurings, including: Telewest, Tele Columbus Group and British Vita.

The main benefits of schemes include:

  1. there is no need to prove insolvency, so action can be taken early at the first signs of distress (and schemes can be used to deal with solvent business particularly in an insurance context)

  2. if the scheme is approved by the requisite majority in number (representing at least 75% in value of creditors (or members or any class of them) present and voting in person or by proxy)