Testing the limits of UK Schemes of Arrangement

Author: | Published: 20 Feb 2013

The use of English law schemes of arrangement, or schemes for short, by companies facing complex financial restructurings has proliferated recently. Much of this is down to their flexibility and the willingness of the English courts to sanction their use by overseas companies. In light of this, it is timely to reflect on the hot topics emanating from recently approved cases.

At its core, a scheme is a formal statutory procedure commenced under the Companies Act 2006, pursuant to which a company may propose a 'compromise' or 'arrangement' with some or all of its creditors. A key advantage of a scheme is that it can provide an opportunity to implement a restructuring solution at a lower approval threshold than would ordinarily apply under the terms of financing documentation, or overseas restructuring processes. Schemes can, therefore, avoid the need for the unanimous consent of a particular group of creditors and thereby...