Vol 14 (2017) - Issue 4

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The Future of Schemes of Arrangement: An Irish Perspective

The Scheme of Arrangement ('the Scheme') as evolved in England has long been the envy of many jurisdictions as a corporate restructuring tool. On foot of the decision of the United Kingdom to invoke Article 50(2) of the Treaty on European Union and exit the union there have been many column inches and much airtime given to speculation about the future of the Scheme.
England has long been a global leader for the restructuring market. While this is unlikely to change, this paper considers how Ireland can facilitate and support that position through the continued use of the Scheme. Examinership Schemes, a uniquely Irish tool, are discussed briefly in the same context as an alternative to the Scheme.

The Scheme in Ireland
The Companies Act 1963 was the first, major modernisation of company law in Ireland after independence. It borrowed heavily from the UK’s legislation at the time and, in Section 201, effectively replicated the Scheme provisions.
The definition of company in the Scheme provisions extended to any company liable to be wound up under the act, which meant it could be used by non-Irish companies which could demonstrate a sufficient connection with Ireland.
The Scheme has been reasonably well used, although more often of late for corporate reorganisations, mergers and de-mergers than for insolvent restructurings.
In June 2015, the Companies Act 2014 was commenced. Although its primary purpose was to consolidate 33 acts and other legislative instruments, it does effect some important modernisations. So, for example, it retained the Scheme provisions but it is now no longer necessary to get a court order to convene the Scheme meetings. Instead, by virtue of section 450, this may now be done by the directors themselves.
As a result, the essential features of a scheme with creditors may be summarised as follows:
(a) A compromise or arrangement is proposed between a company and its creditors or any class of them;
(b) Directors may convene meetings of creditors without court order;
(c) The court may order a moratorium for such period as it sees fit;
(d) Creditor approval requires a majority in number representing three-fourths in value (of each class);
(e) Court sanction hearing at which process and form, and a 'fair and equitable'/'reasonable man' test is applied.