Scheme of Arrangement Definition

GLOSSARY

/skiːm/ /ɒv,(ə)v/ /əˈreɪn(d)ʒm(ə)nt/

Published by a UU��ֱ�� Restructuring & Insolvency expert

What does Scheme of Arrangement mean?

A formal arrangement in the UK between the company and its creditors and/or its members (or a class of its creditors or members) pursuant to Part 26 of the Companies Act 2006 (CA 2006) (otherwise known as a scheme or Part 26 Scheme) which is sanctioned by court. The voting threshold for approval of the scheme is 75% by value and a majority in number of creditors (or members) or any class thereof voting in person or by proxy at each of the scheme meetings. This voting majority means that dissenting creditors can be easily crammed down.

At the first court hearing (convening hearing) the court will check whether the classes are properly formed and will direct that a meeting of creditors/members be convened. After the meeting of creditors/members, there will be a second hearing (sanction hearing) at which the scheme can finally be sanctioned. Insolvency need not be proved, so it is a useful tool avoiding the stigma of insolvency. Solvent members' schemes are often used to implement takeover schemes or public to private schemes. It

View the related checklists about Scheme of Arrangement

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Voluntary striking off and dissolution—checklist

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The prescribed part under section 176A of the Insolvency Act 1986

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Side pockets for FCA authorised funds

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Director’s responsibility letter—offeree directors

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Connection agreement for private wires

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Dive into our 200 Precedents related to Scheme of Arrangement

Can a majority shareholder force a minority shareholder to transfer their shares (whether to that majority shareholder or a third party)?

Can a majority shareholder force a minority shareholder to transfer their shares (whether to that majority shareholder or a third party)? A majority shareholder in a company has limited options under English law to force a minority shareholder to transfer their shares: they must rely on the statutory mechanism of squeeze-out or a scheme of arrangement to effect the transfer or, in a worst-case scenario, resort to liquidating the company. For this reason, a majority shareholder in a company will typically contract with any minority shareholders to gain these rights, using suitably drafted shareholders’ agreements and/or bespoke articles of association. This Q&A assumes that no shares in the company in question are publicly traded. Squeeze-out: compulsory acquisition of shares under the Companies Act 2006 Where a proposed buyer makes a takeover offer (as defined in sections 974–976 of the Companies Act 2006 (CA 2006)) for shares in a company, CA 2006 provides the buyer with a right to acquire the shares held by those minority shareholders...

Can a single class of shares be sub-divided into multiple classes with differing rights if the company has articles in the form of the model articles?

Can a single class of shares be sub-divided into multiple classes with differing rights if the company has articles in the form of the model articles? Section 617 of the Companies Act 2006 (CA 2006) allows a limited company to alter its share capital by sub-dividing its shares. CA 2006, s 618 permits a limited company to exercise a power to sub-divide its shares, or any of them, into shares of a smaller amount than its existing shares, provided that its shareholders have passed a resolution authorising it to do so. The resolution may be an ordinary resolution, unless the company’s articles of association require a higher majority (or unanimity). The proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as in the case of the share from which it derived. There is no requirement in CA 2006 for a company to have a power or authority to sub-divide shares in its articles, although the articles...

See the 29 Q&As about Scheme of Arrangement

Market Standards Trend Report—Trends in UK public M&A in Q3 2024

Market Standards analysis: Market Standards has conducted research to examine the current trends in UK public M&A for the period 1 July 2024 to 30 September 2024.

Restructuring & Insolvency weekly highlights—15 August 2024

This week's edition of Restructuring & Insolvency weekly highlights includes: the publication by the Insolvency Service of July 2024 enforcement outcomes management information, analysis of a meeting of creditors convened for a scheme designed to navigate sanctions-related issues (Re Browne), plus a round-up of news and cases for restructuring and insolvency professionals.

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