Scheme of arrangement

Schemes of arrangement are used to execute arbitrary changes in the structure of a business and thus are used when a reorganisation cannot be achieved by other means.

[1] In Australia, the relevant provisions for effecting a scheme of arrangement or reconstruction are located in Part 5.1 of the Corporations Act 2001 (Cth).

The shareholders and creditors then meet in classes and if the scheme is approved, it is authorized at a second court hearing.

However, recent case law has suggested that creditor schemes may be more flexible than a deed of company arrangement, particularly in regard to third party releases.

[6] The courts have adopted a more liberal application of section 411(17), looking primarily for evidence that the company has a bona fide commercial reason for the scheme.

In Ghana, the relevant provision for effecting a scheme of arrangement is section 239 of the Companies Act, 2019.

The Registrar-General will then appoint a qualified insolvency practitioner as a reporter to determine if the arrangement or compromise is fair.

[11] When the Companies Act 1955 was reformed in 1989, the New Zealand Law Commission divided the previous scheme of arrangement provisions into two separate procedures.

There is a prescriptive option that does not require court sanction, but instead allows shareholders or creditors to bring an amalgamation on a 75% vote at a meeting, and a procedure which allows the High Court to order an amalgamation or compromise without a vote.

[3] It is usual for the court to require 75% of shareholders or creditors to vote in favour of the scheme, but there is no headcount test.

Section 710 of the 2020 Act defined an 'arrangement' asany change in the rights or liabilities of members, debenture holders or creditors of a company or any class of them or in the regulation of a company, other than a change effected under any other provision of this Act or by the unanimous agreement of all parties affected[14]In South Africa, the relevant provisions for effecting a scheme of arrangement are found in the Companies Act 2008, No.