A Scheme of Arrangement can be a lifeline for companies aiming to restructure debt whilst maintaining their trading activities. It\’s an alternative to a Company Voluntary Arrangement (CVA) and different from other debt solutions like a Creditors’ Voluntary Liquidation (CVL) or administration.
A Scheme of Arrangement is a court-approved process under the Companies Act 2006, allowing companies to restructure debt and potentially facilitate other corporate activities, such as takeovers or capital returns. Unlike a Company Voluntary Arrangement (CVA), which falls under the Insolvency Act 1986, this process offers a different pathway with unique features:
- Creditor Approval: Requires a 75% majority in value for creditor consent.
- Court Sanction: Mandatory court approval and subsequent Companies House registration.
- Initiation: Can be proposed by the company, creditors, liquidators, or administrators.
- Trading Continuity: Allows the company to continue trading with directors in charge.
Differences from a CVA include:
- Legislation: Governed by the Companies Act 2006, not the Insolvency Act 1986.
- Moratorium: Does not automatically grant protection from legal actions, unlike a CVA.
- Flexibility: Potentially offers more flexibility and discretion.
Court Involvement: Extensive court involvement is required, which can add complexity and cost.
It\’s a sophisticated process that should be navigated with professional advice due to its intricacies and potential financial implications.
For more information on the different options for insolvent companies, take a look at our other blogs
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