Hayes solicitors LLP recently represented a company and process adviser in a scheme of arrangement made pursuant to Part 9 of the Companies Act 2014.

Understanding Part 9 Schemes of Arrangement

A Scheme of Arrangement is a statutory procedure under Part 9 of the Companies Act 2014, which allows a company to restructure its debts and obligations with the approval of its creditors and members. This process is particularly useful when a company faces financial difficulties but has the potential to continue as a going concern if its debts can be restructured.

The key steps involved in a Scheme of Arrangement include:

1. Proposal and Meetings: The company’s directors or the court convene meetings of the creditors and members to discuss and vote on the proposed scheme.
2. Approval: A special majority, defined as a majority in number representing at least 75 per cent in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting either in person or by proxy at the scheme meeting.
3. Court Sanction: The scheme must then be sanctioned by the High Court. The High Court will review the scheme to ensure that it complies with statutory provisions and is fair and reasonable.
4. Binding Effect: Once sanctioned by the court, the scheme becomes binding on all creditors and members, including those who voted against it or did not participate in the vote.

Why chose a Part 9 Scheme of Arrangement

Part 9 Schemes of Arrangement have the following advantages over other forms of restructuring:

• Solvency: this mechanism is available to solvent companies.
• Flexibility: It allows for a wide range of restructuring options, including debt rescheduling, capital restructuring, and mergers.
• Binding Nature: Once approved and sanctioned, the scheme is binding on all parties, providing certainty and stability.
• Court Supervision: The involvement of the High Court ensures that the process is conducted fairly and transparently.
• Protection from Creditors: The court can stay all proceedings and restrain further actions against the company during the process, providing a breathing space for the company to restructure.

Case Study

The company in this instance faced significant revenue liabilities and was not eligible for a phased payment arrangement. If the company was not able to restructure its debts, it would have been wound up. This would have resulted in the loss of jobs for its employees and the cessation of its operations. By successfully implementing the scheme of arrangement, the company’s debts were restructured, allowing it to continue its business and preserve employment.

Contact Us

If you have any queries about schemes of arrangement or other forms of corporate rescue, please contact Michael Kelly or Joe O’Malley. Our team has extensive experience in corporate restructuring and can provide expert advice and assistance tailored to your specific needs.