Schemes of arrangement are a well-known and familiar tool for many within M&A. They are often used to implement acquisitions of public or widely held companies or restructurings of financial indebtedness, frequently as part of an acquisition through a debt-for-equity transaction. What is less well-known is how schemes of arrangement can potentially be used to manage a target company’s liabilities beyond financial indebtedness particularly in an increasingly litigious and regulated world.
What is a scheme of arrangement?
A long-standing feature of company law, a scheme of arrangement allows a company to impose a compromise or arrangement on its shareholders and/ or creditors, provided the scheme of arrangement is sanctioned by the court and approved by shareholders and/or creditors (depending on who is affected by the scheme) accounting for 75% in value and 50% in number.