Schemes of arrangement

General

The applicable legislation for schemes is:

•
the section 895 of the Companies Act 2006 (CA 2006) (note that jurisdiction arises under the Companies Act provisions, rather than the Insolvency Act 1986 (IA 1986))
•
IA 1986, s 221 (for the definition of 'foreign registered company' which is relevant to the sufficient connection test)

Schemes are flexible arrangements which are often used in complex restructurings. The main benefits of schemes include:

•
there's no need to prove insolvency, so action can be taken early at the first signs of distress
•
dissenting creditors within a class can be crammed down if the scheme is approved by a majority in number representing at least ¾ in value of creditors (or members or any class of them) present and voting in person or by proxy
•
they can bind secured creditors (with the necessary majorities), unlike company voluntary arrangements (CVAs)
•
foreign companies can be subject to a scheme if there is sufficient connection with the UK; as the EU Recast Regulation on Insolvency doesn't apply to schemes (either pre or post IP completion

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

TAKE A FREE TRIAL

Latest Restructuring & Insolvency News

Carry on, debtor—jurisdictional hijinks in cross-border bankruptcy proceedings (Jones v Aston Risk Management Ltd)

Restructuring & Insolvency analysis: The High Court refused permission to serve bankruptcy proceedings out of the jurisdiction on a debtor in Guernsey, holding there was no good arguable case that he had carried on business in England and Wales within the last three years under section 265(2)(b)(ii) of the Insolvency Act 1986 (IA 1986). The court found that the debtor's continuing relationship with companies based in England and Wales as director and creditor/debtor did not constitute carrying on a separate business on his own account. The decision provides important guidance on the interpretation of ‘carrying on business’ for cross-border insolvency jurisdiction, particularly in cases where debtors maintain connections with companies in England and Wales while residing outside the UK. Written by Camilla Whitehouse, barrister and head of Chambers, Gainsborough Law.

Insolvency Service disqualifies former footballer for BBL fraud

The Insolvency Service has banned former professional footballer, Kieron Minto-St.Aimie, as a company director for eight years after deceptively acquiring a covid bounce back loan (BBL) for his sports academy in Brent. Minto-St.Aimie made a fraudulent claim for a £25,000 BBL, by overstating the company's turnover by £60,000, to secure a larger loan than the £10,000 to which the business was entitled.

Presentation of winding up petition prevented by lender’s potential misrepresentation (Alpha Schools (Holdings) Ltd v Signal Alpha III Fund LP)

Restructuring & Insolvency analysis: This was an application for an injunction to restrain presentation of a winding up petition. The respondent was a company which asserted that it was entitled, pursuant to a term sheet prepared during loan negotiations, to a £350,000 break fee and certain other sums. The applicant’s main argument was that it had a cross-claim in misrepresentation which meant that (1) the term sheet, to the extent that it had contractual force, had been rescinded and (2) there was in any event a damages claim large enough to extinguish the alleged debt. It was held that there was sufficient evidence of misrepresentation to meet the test. The applicant was entitled to an injunction. Written by Nora Wannagat, barrister at Tanfield Chambers.

Restructuring & Insolvency weekly highlights—19 December 2024

This week's edition of Restructuring & Insolvency weekly highlights includes: the publication by the Insolvency Service of its monthly insolvency statistics for November 2024, an examination of the meaning of ‘unregistered company’ under section 220(1) of the Insolvency Act 1986 (IA 1986) (East Riding of Yorkshire Council v KMG), analysis of the Commercial Court’s guidance on pleading and proving claims under IA 1986, s 423 (Invest Bank PSC v El-Husseini), plus a round-up of other news and cases for restructuring and insolvency professionals.

View Restructuring & Insolvency by content type :

News