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Restructuring Plans Under the UK’s Companies Act

Restructuring plans under the UK's Companies Act are governed by Part 26A of the Companies Act 2006. This legislation introduced a new restructuring tool called a "restructuring plan" (formerly known as a "scheme of arrangement") that allows companies to propose and implement a plan to restructure their debts and liabilities.

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Restructuring Plans Under the UK’s Companies Act

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  1. Restructuring Plans Under the UK’s Companies Act Restructuring plans under the UK's Companies Act are governed by Part 26A of the Companies Act 2006. This legislation introduced a new restructuring tool called a "restructuring plan" (formerly known as a "scheme of arrangement") that allows companies to propose and implement a plan to restructure their debts and liabilities. Here's an overview of the key features and process of a restructuring plan under the UK's Companies Act: Eligibility: A company can propose a restructuring plan if it is facing, or is likely to face, financial difficulties that affect its ability to carry on business as usual or meet its obligations. The company must be registered in the UK, although it may have an overseas presence. Approval by the court: The restructuring plan requires approval by the court to become effective. The court will consider whether the plan has been properly proposed and meets the relevant statutory requirements. Proposal and classes: The company must draft a restructuring plan that sets out the terms and conditions of the proposed restructuring. The plan should classify the creditors and members into different classes based on their rights and interests. Voting on the plan: The restructuring plan must be approved by at least 75% in value of each class of creditors or members who vote on the plan. The court will convene a meeting

  2. of each class to vote on the plan. If the requisite majority approves the plan, the court may still exercise its discretion to approve the plan even if one or more classes dissent. Court approval: After the plan is approved by the requisite majorities, the court will hold a hearing to consider whether to sanction the plan. The court will assess whether the plan is fair, just, and reasonable, taking into account the interests of all parties involved. Effect of court approval: Once the court approves the plan, it becomes binding on all creditors or members, including those who dissented or did not vote. This "cross-class cram down" feature distinguishes the restructuring plan from traditional schemes of arrangement. Implementation: After court approval, the restructuring plan is implemented according to its terms. This may involve various actions, such as debt write-downs, debt-to-equity conversions, or other measures to restructure the company's financial obligations. It's important to note that the restructuring plan process is complex and requires expert legal advice. The involvement of a qualified insolvency practitioner or solicitor experienced in restructuring is highly recommended. They can guide the company through the process, help draft the plan, liaise with creditors, and represent the company in court proceedings.

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