Schemes of Arrangement: Theory, Structure and Operation

Schemes of arrangement are a vital tool for reorganizing a company's capital, particularly in the aftermath of the 2008 financial crisis and the COVID-19 pandemic. This book provides a critical analysis of schemes and their uses, examines recent developments, and considers whether further reform is needed to ensure their continued development.

Format: Hardback
Length: 508 pages
Publication date: 16 December 2021
Publisher: Cambridge University Press

Schemes of arrangement are a vital and adaptable tool that companies can utilize to restructure their capital. Over the past two decades, these schemes have experienced a resurgence, particularly in the aftermath of the 2008 financial crisis, when businesses and their advisors sought effective strategies to navigate financial distress. The COVID-19 pandemic has further underscored the importance of having robust debt restructuring mechanisms in place, as governments seek to ensure economic stability and support businesses during these challenging times. Moreover, schemes have become the preferred method for recommended takeovers, offering a streamlined and efficient approach to corporate acquisitions.

In this comprehensive book, we undertake a critical, contextual, and comparative analysis of schemes and their various applications. We examine recent developments in this field, such as the Corporate Insolvency and Governance Act 2020, and assess whether further reform is necessary to ensure that schemes remain an indispensable tool for companies in the future.

Schemes of arrangement offer several advantages to companies seeking to restructure their capital. Firstly, they provide a flexible framework that allows for the reorganization of debt and other financial obligations, enabling businesses to optimize their financial position and improve their cash flow. This can be particularly valuable in times of economic uncertainty or when companies face financial challenges.

Secondly, schemes offer a mechanism for companies to exit difficult situations without the need for bankruptcy or liquidation. By entering into a scheme, companies can negotiate with their creditors and other stakeholders to reach a mutually beneficial agreement, which may include debt reduction, interest rate reductions, or asset sales. This can help preserve jobs, protect valuable assets, and minimize the impact on stakeholders.

Thirdly, schemes can facilitate the growth and development of companies by providing them with access to capital and resources. Through a scheme, companies can attract new investors, secure financing, and expand their operations. This can lead to job creation, economic growth, and improved competitiveness in the market.

However, it is important to note that schemes are not without their challenges. One of the primary concerns is the potential impact on creditors and other stakeholders. Schemes can result in the loss of value for creditors, particularly if they are not fully repaid or if the terms of the agreement are not favorable. Additionally, the process of entering into a scheme can be complex and time-consuming, requiring significant legal and financial expertise.

To address these concerns, governments and regulatory bodies have implemented various measures to regulate schemes and ensure that they are conducted in a fair and transparent manner. For example, the Corporate Insolvency and Governance Act 2020 introduced new rules and procedures for the conduct of schemes, aimed at protecting creditors and promoting fair treatment of all stakeholders.

In conclusion, schemes of arrangement are a crucial tool that companies can use to restructure their capital and navigate financial challenges. They offer a flexible, efficient, and cost-effective approach to debt restructuring, exit difficult situations, and facilitate growth and development. While there are challenges associated with schemes, ongoing reform and regulation can help ensure that they continue to develop as an indispensable tool for companies in the future.

Weight: 771g
Dimension: 229 x 152 x 25 (mm)
ISBN-13: 9781108835329
Edition number: 2 Revised edition