Benefits of the Scheme. between companies was a court approved scheme of arrangement. By Orla McCoy, Flora Innes When faced with multiple class action threats, there is little downside in a company giving consideration to a creditors’ scheme of arrangement to achieve a quicker and cheaper resolution of the underlying claims. Scheme of Arrangement. Bermuda Schemes of Arrangement Delivering Global Restructurings and Reorganisations Introduction A court-supervised scheme of arrangement is the most straightforward and cost-effective way to facilitate a corporate rescue or restructuring of a company which is incorporated in Bermuda but has its operations or listing status in another jurisdiction. more than 50%) and this majority must represent 75% in value of the voting class. Schemes of Arrangement can be passed by a 75% majority in each interest class of shareholder and a simple majority resolution of all shareholders. A scheme of arrangement is a procedure that allows a Code Company to reorganise its share capital with the approval of its shareholders and the Court. The most well-known example is the Allnex and Nuplex Scheme of Arrangement, which in 2016 resulted in the full takeover of Nuplex and the existing shareholders exiting for agreed payments. Sections 86-87 of the Companies Law give the Cayman Islands courts significant flexibility to approve corporate restructuring by way of schemes of arrangement, reconstruction and amalgamation. 27 Sep 2018. Creditors’ schemes of arrangement – a restructuring tool to pre-empt class action risks? A scheme of arrangement (“Scheme”) is a statutory procedure under English law which allows a company to make an arrangement or compromise with its shareholders or creditors, or any class of them. Schemes of arrangement are a particularly popular method of conducting UK public company takeovers, in part as a consequence of the 75% approval threshold for a scheme being lower than the 90% threshold at which an offeror under a contractual takeover offer can then rely on statutory "squeeze out" provisions to acquire 100% control. Under Section 366 of the Companies Act 2016, the Court may order for a meeting of the company to be convened for the purposes of proposing a ‘scheme of arrangement’ (“SOA”), which is essentially a plan for how the company is going to pay off its outstanding debts.. This majority must also represent at least 75… In particular, a scheme of arrangement requires approval from shareholders who constitute a majority in number of each class of shareholders who are subject to the scheme of arrangement and who are voting at the meeting. Key steps in a scheme of arrangement Initial approach. 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. A scheme can also be used in a debt and equity swap where a certain creditor class takes a certain class of share in lieu of the debt. At the creditors’ meeting, the proposed Scheme of Arrangement must be approved by a majority of the creditors present and voting in each class (i.e. The first step in the scheme process will typically involve the offeror approaching the target company with an indicative offer to propose a scheme under which the offeror would acquire 100% of the target company.
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