16 - Restructure & Takeover

• A scheme of reconstruction allows a company (the transferor company) to transfer all or part of its business to another company (or companies). The transferor company is then voluntarily wound up.
• To begin a scheme of reconstruction, the transferor company must pass a special resolution to voluntarily wind up the company in accordance with section 110 of the Insolvency Act 1986.
• A scheme of arrangement is a compromise or arrangement between a company and (i) its creditors, or any class of them; or (ii) its members, or any class of them. In other words, it allows a company to amend the rights of its creditors and members, with the important point to note being that it does not need to obtain the unanimous approval of the creditors or members in question.
• A key benefit of a scheme of arrangement is its versatility.
• As a scheme of arrangement involves a ‘compromise or arrangement’, it follows that a party unilaterally giving up all their rights without receiving anything in return will not constitute a scheme of arrangement.
• Many schemes of arrangement will involve an alteration of the rights of the creditors or members but an alteration of rights is not required.
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  The following can apply to the Court to summon meetings of the relevant creditors / members for a scheme of arrangement:

  ·         The Company

  ·         Any creditor or member of the Company

  ·         The Liquidator, if the company is in liquidation

  ·         The administrator, if the company is in administration
• The three stages of a scheme of arrangement are:

  1.     The application to summon meetings made to the Court

  2.     Approval of the scheme (2 stages)

  a.     Affected Creditors / members receive notice of the meeting, with the stage 1 court order setting out the notice requirements

  b.     The meetings will be held to determine if approved

  3.     Court Sanction
• A scheme of arrangement requires that separate meetings are to be held for each class of member / creditor affected. Each meeting must approve the scheme in order to proceed to stage 3 of the process.
• If the court order that a scheme of arrangement be sanctioned, then it is not effective until a copy of the order is delivered to the Registrar of Companies.
• A scheme of arrangement, once sanctioned, cannot bind third parties but it can indirectly affect their rights.
• Once sanctioned, a scheme of arrangement will bind the company and all those creditors or members who are affected by it.
• A Restructuring Plan was introduced in Corporate Insolvency and Governance Act 2020.
• the Takeover Code provides that control of a company is acquired if a person controls an interest of 30% or more of the voting shares in a PLC.
• The Panel on Takeovers and Mergers (the Panel) have been granted significant statutory powers and create and maintain the rules of that implement the Takeover Directive.
• The Panel consists of 36 member. The day to day work is carried out by the Panel Executive. The Panel can delegate its functions to a committee or sub-committee.
• The Code is not concerned with the financial or commercial advantages or disadvantages of a takeover. It is not the intent of the Code to facilitate takeovers.
• The mandatory offer - the shareholders of the company with the ability to exit the company by requiring a person who has obtained controlling interest in the company to make an offer to purchase all of the shares in the company.