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

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