How does scheme of arrangement work?

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.

What is a scheme of arrangement insolvency?

A creditors’ scheme of arrangement is a process available to financially distressed companies seeking to restructure and avoid liquidation. A scheme allows for the creation of a binding agreement between the company and its creditors (or a class of creditors).

Who can propose a scheme of arrangement?

Section 411(1) states that where a company and its creditors or shareholders propose a compromise or arrangement, the court can order a meeting or the creditors or shareholders. Once the scheme is proposed, an application must be made to court for the meeting.

What is a scheme of arrangement in company law?

SCHEME OF ARRANGEMENT – THE CONCEPT Simply put, a scheme of arrangement is an arrangement between a company and its shareholders or its creditors for the purpose of effecting a transaction which cannot be effected pursuant to any other provision of CAMA.

How long does a scheme of arrangement last?

A straightforward scheme of arrangement can be completed within two months, but others will take longer. Court dates should be booked as soon as possible and can be booked confidentially. Your legal advisors will be able to help with this.

How long does a 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.

What are the parts of a scheme of arrangement?

This Scheme of Arrangement is divided into the following parts: (i) PART I deals with the definitions and share capital; (ii) PART II deals with the transfer and vesting of Business Undertaking of HSRIL; (iii) PART III which deals with general terms and conditions applicable to this the Scheme of Arrangement.

Is a scheme of arrangement mandatory?

The only element that would seem to be required to make a scheme a scheme of arrangement as contemplated under section 114 is that it must be an arrangement between the company and holders of any class of securities in that company.

Which court approves a scheme of arrangement?

Court approval and implementation If target shareholders approve the scheme, the target will then seek Court orders approving the scheme at the ‘second court hearing’. The Court may not approve the scheme unless ASIC has given the Court a statement that ASIC does not object to the scheme.

How do you pass a scheme of arrangement?

It is a court-approved agreement between a company and its shareholders or creditors to allow a bidder to acquire all of the shares in the company. For a scheme of arrangement to pass, shareholders holding at least 75% of the issued shares must vote in favour.