Schemes of Arrangement and Restructuring Plans under the Companies Act 2006
If your business is in a financially difficult situation, a scheme of arrangement or restructuring plan under Part 26A of the Companies Act 2006 (“CA 2006”) may help the company address its financial difficulties.
Schemes of Arrangement
- A scheme of arrangement is a flexible restructuring tool, often used in complex scenarios involving debt restructuring, mergers or capital reductions.
- Schemes can be implemented early, even if the company is not insolvent, allowing businesses to address financial difficulties before they worsen.
- One advantage of schemes is that they are less publicised, reducing the risk of reputational damage.
- Schemes require approval by creditors, with at least 75% in value of each class of creditors voting in favour.
- The court is involved at several stages, making the process more expensive than other insolvency options.
- A significant benefit of schemes is the ability to bind dissenting secured creditors, unlike CVAs.
- While schemes do not offer automatic protection from creditor actions, courts may grant a stay of proceedings to allow time for the scheme to be implemented.
Restructuring Plans (Part 26A)
Introduced in 2020, restructuring plans under Part 26A of CA 2006 are similar to schemes of arrangement but offer additional features.
Restructuring plans are specifically designed for companies facing serious financial difficulties that threaten their ability to continue operating as a going concern.
Key differences between a scheme of arrangement and restructuring plans include:
- Restructuring plans require only a 75% majority in value of creditors for approval, without needing a majority in number.
- They include a "cross-class cram down" provision, allowing the court to bind dissenting creditor groups if the plan is approved by other classes of creditors with an economic interest in the company.
- Restructuring plans can be used by companies of all sizes, though the complexity and cost may deter smaller businesses from opting for this procedure. Large companies with more complex financial structures are more likely to benefit from restructuring plans.
How We Can Help
- Guiding companies through the entire process, from initial assessment to court approval.
- Drafting the necessary legal documents.
- Ensuring the plan complies with relevant legislation and addresses legal implications.
- Advise on communication strategies with all parties involved.
- Ensuring the company is represented at the court hearings.
- Supporting ongoing compliance with the restructuring plan and helping to resolve any disputes which arise.
When is a Restructuring Plan Appropriate?
Schemes of arrangement are typically used to restructure insolvent companies, to reorganise group companies, for acquisitions and demergers, to remove minority shareholders, to settle a solvent insurance company’s uncertain long-term liabilities and to return capital to shareholders. Schemes of arrangement can therefore be used in respect of both solvent and insolvent companies.
Restructuring plans are available only to companies in financial distress as they are designed to eliminate, reduce, prevent or mitigate the adverse effect on a company’s ability to carry on business as a going concern of any serious financial difficulties that the company is encountering or is likely to encounter.
The Process: Schemes of Arrangement
- Negotiation of the scheme proposal with a core group of creditors and/or shareholders.
- Send the Practice Statement Letter to the scheme company’s creditors and/or shareholders.
- Application to the court for an order to convene meetings of the relevant shareholders and/or creditors of the company undergoing the scheme (the convening hearing).
- Notice of the scheme meetings along with scheme documentation provided to creditors and/or shareholders following the convening hearing.
- Meetings of the relevant shareholders and/or creditors to seek approval of the scheme by the requisite majorities.
- The chairman of the meetings submits a report to the court on the results of the meetings.
- The final sanctioning of the scheme by the court (the sanction hearing).
- Filing of the order sanctioning the scheme at Companies House, upon the filing of which the scheme will become effective.
The Process: Restructuring Plans
- A restructuring plan proposal is sent to creditors and shareholders and filed at court with an application for the convening hearing seeking leave to convene the meetings of the creditors and shareholders.
- At the first court hearing, the court will examine the classes of creditors and shareholders. If satisfied, the court will confirm that a vote on the proposal may be conducted on a specified date ahead of a second hearing to sanction the plan (the sanction hearing).
- The necessary information about the plan must be sent to creditors and shareholders (or advertised in a manner approved by the court) so that the creditors and shareholders can decide whether or not to support the proposal for the plan.
- If the plan proposal is not challenged and no counter-proposals are permitted by the court then the creditors and shareholders will vote on the proposal.
- Subject to the requisite voting thresholds being met and the rules for imposing a cross-class cram down being complied with, the court will then schedule a sanction hearing at which it will consider if the necessary requirements have been met and will make a decision whether or not to approve the restructuring plan and make it binding on all affected creditors and shareholders.
- Once sanctioned by the court, the plan is binding when it is published in the Gazette or when it is delivered to Companies House (as appropriate).
Relationship with Moratoriums and Other Procedures
Schemes of arrangements and restructuring plans have been compared to company voluntary arrangements (CVAs) but there are a number of differences between them as follows:
- Restructuring plans and schemes of arrangements bind both shareholders and creditors (including secured creditors). CVAs do not bind secured creditors.
- Cross-class cram down is only available in relation to restructuring plans.
- There is significant court involvement in respect of restructuring plans and schemes of arrangement. There is minimal court involvement in a CVA unless creditors challenge the CVA proposal.
- Schemes of arrangement do not trigger a moratorium protecting the company from action being taken by its creditors. Both restructuring plans and CVAs can be combined with an application to the court for a statutory moratorium.
- It is not mandatory for an insolvency practitioner to be appointed as a supervisor of a restructuring plan or a scheme of arrangement. An insolvency practitioner must be appointed as a supervisor of a CVA.
- Creditors and shareholders can propose competing restructuring plans. Creditors and shareholders cannot impose a scheme of arrangement on a company without its consent. Creditors and shareholders also cannot propose a competing CVA (but they can propose modifications).
- The costs of both restructuring plans and schemes of arrangement can be significant given the court’s involvement. CVAs tend to be cheaper to implement unless challenges go all the way to trial.
If either a restructuring plan or a scheme of arrangement is unsuitable, other insolvency and restructuring processes may be available, such as administration, a CVA or liquidation.
Restructuring Plans FAQs
Who can be included in a restructuring plan?
A restructuring plan can include creditors (secured and unsecured), shareholders and other relevant parties (such as suppliers and customers) who have a financial interest in the company.
How long does the court process take?
The court process for a restructuring plan, from start to finish, typically takes around 8-12 weeks, but this can vary depending on the complexity of the plan.
The court process for a scheme of arrangement typically takes from 6- 8 weeks to several months. The exact duration depends on the complexity of the scheme, the number of stakeholders involved and whether any legal challenges arise.
Can dissenting creditors be bound?
Dissenting creditors can be bound by a scheme of arrangement, even if they don’t vote in favour of it.
This is a key feature of schemes of arrangement, allowing for a compromise or arrangement to be binding on all members of a class, provided the necessary majority (in number and value) within that class approves it.
Dissenting creditors can also be bound by a restructuring plan, even if they vote against it, through a process called cross-class cram down.
This mechanism allows a court to sanction a plan and bind all creditors, including those who voted against it, if certain conditions are met.
What are the main benefits of a scheme of arrangement?
- No need to prove insolvency, so that necessary restructuring actions can be taken early at the first signs of financial distress;
- Companies being able to trade on throughout the process;
- Schemes being less publicised than other insolvency procedures so that the company is less likely to suffer from negative publicity and a loss of reputation;
- Dissenting creditors within a class being able to be crammed down if the scheme is approved by a majority in number representing at least 75% in value of creditors (or shareholders of any class of them) present and voting in person or by proxy;
- The ability to bind secured creditors (unlike CVAs); and
- Foreign companies being subject to a scheme if there is a sufficient connection to the UK.
What are the main limitations to a scheme of arrangement?
The main limitation to a scheme of arrangement is the lack of any automatic statutory moratorium protecting the company from action being taken by its creditors.
However, the High Court has held that it has the power to stay proceedings at its discretion to allow time for a scheme to be put in place.
Schemes rely on a fair amount of court involvement and two court hearings are generally required before a scheme is approved. This can make the process expensive.
When does a scheme of arrangement come to an end?
A scheme does not have a specific end date but finishes when it has been implemented.
The terms of the scheme may allow for the repayment of debts over a certain period of time, or it may be that it constitutes a “one off” restructuring plan that is fully implemented with a very short period of time.
Why Work With Our Insolvency Team
- We are ranked in the Legal 500 and Chambers and Partners for our legal expertise.
- Richard Wolff, our Head of Insolvency, has been recognised as a leading partner by the Legal 500, recognising the strongest partners in their field, leading on market-leading deals and endorsed by peers and clients alike.
- We are members of R3, the Association of Business Recovery Professionals.
- You will receive city-quality advice at regional prices.
- Price transparency – we provide our clients with a cost estimate at the outset of any engagement with ongoing cost updates throughout the matter.
- Our Partner-led service ensures that you receive the very best legal advice and commercially focussed support.
- Our insolvency and restructuring team has in depth experience across a diverse variety of sectors, focused on achieving your objectives and meeting your deadlines.
- We are a full-service law firm operating from a single-site office, which means our teams communicate effectively and efficiently and our insolvency and restructuring lawyers can draw on support when required from other specialist lawyers such as those in our corporate, property and dispute resolution teams.
- Our insolvency and restructuring solicitors use the latest technology to ensure that we are working as efficiently as possible and that geographical distance does not prevent us from providing you with excellent client service.
- Our fast response times enable us to deal with time-sensitive enforcement scenarios.
- We have excellent working relationships with many national, regional and local independent insolvency practitioners who can be called upon to provide their advice and input as and when required.
- Check out the Myerson Promise for more information on the benefits of working with us.
Restructuring Plans Case Studies
Advising directors of fabric and window hardware supplier
Working with our Corporate colleagues, we acted for the board of directors of a group of companies in connection with advice relating to a series of convertible loan notes and other secured liabilities which formed part of a cross-group security and loan structure. In tandem, we also provided legal input and support with regard to trading issues.
Due to the complexity of the group security structure and to ensure the client’s ability to continue trading, we had to provide complex advice to our client within short time scales.
We also liaised with a financial consultant engaged by the client as well as dealing with the client’s bank’s legal advisers and a restructuring accountancy practice brought in by the bank to review the group’s overall position and to provide advice in relation to the renewal of the client’s banking facilities.
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Legal 500, 2025
Richard Wolff is a pleasure to work with. He really knows his field and it is enjoyable to work on a high level with him when discussing instructions. He is engaging and knowledgeable.
Legal 500, 2025
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Legal 500, 2025
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Legal 500, 2025
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Legal 500, 2025
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Legal 500, 2025
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