Schemes of Arrangements, Restructuring Plans & Chapter 11

Schemes Generally

• The key requirements of the Companies Act 2006

• Creditor schemes

• Member schemes

• Takeover schemes

• Restructuring Plans

• Varied application - Summary of ways schemes have been used

The General Requirements

• Scheme of arrangement process; the 3 main stages: Convening Hearing

• The “Class” Meetings

• Sanction Hearing

The two key thresholds for Schemes:

• The Value test

• The Numerosity test

Key concepts

Meaning of “Compromise”

Meaning of “Arrangement”

Meaning of “Creditor”:

• Constitution of the “Classes” of creditors and members

• A company need not include creditors whose rights are not altered by the scheme

The influence of the In re Tea Corporation scheme - meaning of “no economic interest”

Exclusion of members (trade and unsecured) creditors from a class

Record dates & times to assess the classes

Review the revised 2025 Practice Statement

• Practice Statement Letter and earlier issue identification

• Evidence/explanatory statement filing 14 days before convening hearing

• Fuller evidence of creditor engagement

• Realistic timetables and active case management

• Comparison with the prior 26 June 2020 PS

Relevant Parties (Who Can Apply?)

• The relevant parties

• Application to foreign companies/jurisdictions

• EU Judgements Regulation – founding jurisdiction in England in Creditor Schemes: Art 8 (how many creditors must be in England) review of relevant cases

• Relevant cases re ‘foreign’ companies: Art 25 (the English jurisdiction clause): relevant cases on problem areas

• Project Fürst (Aggregate) [22 August 2025]: Frankfurt refused recognition of an English Part 26A RP

• Interaction with the U.S. (Chapter 15):

Review: The Synchreon scheme

CoMi issues & Changes in Governing law:

• Can schemes bind (release) third parties?

Role of the Court

• The Convening Hearing: The two key factors considered by the Court

• Notice periods required

• Distress cases

• Schemes with retail creditors

• Re Instant Cash Loans scheme

Disclosure and the Explanatory Statement

Different Types of Schemes of Arrangement

• Secured Debt transfer: Review: Bluebrook (IMO Car wash)

Unsecured debt transfer

‘Standstill’ schemes:

• Metinvest scheme

• Lessons from the Vinashin Shipping Scheme

Member Schemes (overview)

Issues Relating to the Constitution of Creditor “Classes”

• What constitutes a “Class”? The Classic Test in  Equitable Life case: Review: In RE Hawk Insurance; Sovereign Life

The distinction between ‘Rights’ vs ‘Interests’:

• Review “ Apcoa & Telewest cases

The role of the ‘relevant’ Comparator:

• Review “Re Van Gansewinkel Groep

Can creditors vote in more than one class?

Issues that can fracture a class

Impact on ‘Class’ of Lockup Agreements & other financial/voting incentives/exit fees:

• Key considerations

• Primacom, Seat cases

• Fees in the Re Noble Group approach

Manipulating the Classes:

• Review Apcoa & PrivatBank cases

Manipulating the Value test:

• Dealing with contingent and unliquidated claims

Manipulating the Numerosity test:

• Review the Dee Valley case

Valuation Issues in the Context of Schemes

• Why and how valuation matters in schemes

• The key issues: Liquidation vs Going concern value

• Intrinsic vs Market value

Landmark cases on valuation:

• Review Stabilus revaluation

• Review Bluebrook IMO Car wash revaluation approach

Analysis of the various valuation methods used in IMO and Stabilus

Review a more practical approach to valuation

Restructuring Plans (Part 26A of the Companies Act)

• Outline of the main provisions

• Pros and cons vs Schemes & CVAs

• Similarity to Schemes

• Key differences from Schemes: Voting requirements (75% by value in each class; no numerosity test)

• Cross-class cram down (CCCD): the conditions in s.901G

• The "no worse off" jurisdictional test (s.901G(3))

• The "Just and Equitable" / discretionary sanction

• Court's approach to class composition and class splitting

• Lessons from early cases: Virgin Atlantic, Hurricane Energy (rejected), Gategroup, Virgin Active, Amicus Finance

The Court of Appeal trilogy - resetting the framework:

• Adler [2024]: pari passu default; searching fairness test

• Thames Water [2025]: OTM creditors and third-party releases under scrutiny

• Petrofac [2025]: burden on plan company to evidence fair allocation of new money returns

• The revised 2025 Practice Statement and its impact on Plans (cross-reference)

Cross-border recognition risk for Plans (cross-reference to Project Fürst)

• Market trends in 2025-26

Chapter 11 Overview

• Use and application of Chapter 11 (CH11)

• Types of Chapter 11 – pre-packs, free-fall, pre-negotiated plan

• Choosing the forum / Who is eligible?

• Which entities may access Chapter 11?

• Key benefits: Automatic stay – ‘global application?

• DIP loan financing

• Rejection of executory contracts & leases

• Sale of property (free of collateral) & absolute priority rule

• Cross-class cram-down - requirements

Disadvantages of Chapter 11

Training Objectives

• Schemes (your flexible friend) – whilst Schemes are a creature of statute, over many years English courts have expanded their application in ways perhaps not originally envisaged by Parliament by adopting a commercial approach, thus expanding the application and usefulness of Schemes (e.g., Metinvest’s ‘Standstill’ and the ‘stay’ in Vinashin Shipping).

• The broad jurisdictional reach of Creditor Schemes – the flexibility of Schemes coupled with English courts’ willingness to entertain schemes on ‘foreign’ firms has seen Schemes being widely used for companies around the world. A variety of German, Spanish and Italian companies have used Schemes but firms from further afield have also made use of the flexible benefits inherent in Schemes (Vinashin and Synchreon).

• Member Schemes have wide applications - they have been used for Takeovers, Reduction & Return of Share Capital as well as demergers and removal of minority shareholders.

• The composition of ‘Classes’ – this represents one of the most contentious aspects of Schemes and features numerous cases on a wide range of issues affecting “Class”.

• Cross-class cram-down may not matter – whilst the absence of a CCCD is a potential impediment, landmark decisions have mitigated this impediment to some extent by excluding creditors who either have no economic interest or whose rights are not affected by the Scheme.

• Valuation matters – the proliferation of laminated debt structures together with the exclusion of out-of-the-money creditors from a class vote has pushed this aspect up the agenda. Schemes of Arrangement training reviews the two key judgements on this matter and considers the pros and cons of how to approach this issue.

• Schemes of arrangement in corporate restructuring plans (Part 26A of the Companies Act) – the programme will provide insight into the recently unveiled Restructuring Plan and the lessons from the Virgin Atlantic restructuring.

• Relevant & Recent Cases – the programme highlights the key issues in Schemes of Arrangement (“Schemes”) concerning relevant and recent cases (Matalan, Swissport Super Senior RCF Scheme).

Training Course Summary

This schemes of arrangement course covers the key legal and commercial issues of Schemes of Arrangement and Restructuring Plans (recently used by Virgin Atlantic). English Schemes of Arrangement has long been a widely used pathway for restructurings in a wide variety of jurisdictions abroad. Schemes offer several benefits that promote the preservation of value. First, despite being a creature of Statute the Act does not proscribe the terms so Schemes have been used in restructuring, demergers and take-overs to mention a few examples. Secondly, this flexibility has been enhanced significantly through the commercial approach that English courts have adopted to facilitate Schemes (e.g. by disregarding creditors whose rights are not affected). Thirdly, the scheme of arrangement process is not a formal restructuring which makes them attractive to firms whose business could be terminated via a formal process (e.g. Codere). Finally, Schemes have been available to foreign companies provided there is “sufficient connection” with England and Schemes have also been enforceable in these local jurisdictions. The absence of a cross-class cram down is one notable disadvantage of Schemes and this has been addressed in part by the recent introduction of Restructuring Plans which, whilst broadly following Schemes, do include some additional tools (imported from Ch 11) not available in Schemes (e.g. the cross-class cram down) which will be useful in the waves of restructuring which, doubtless, lie ahead. Schemes of arrangement in corporate restructuring Plans have gained significant traction since their introduction and the recent restructuring of Amicus Asset Finance was the first mid-market company to make use of a Restructuring Plan. Amicus is notable for many interesting features, including a cross-class cram down of a senior creditor class; the first time an insolvency official (i.e. the Administrator) proposed a Restructuring Plan which facilitated a solvent exit from administration (the court appears to have taken a more liberal approach than was evident in prior cases e.g. Virgin Active). One notable difference in Restructuring Plans (vis-à-vis Schemes) is the court’s willingness to split the classes and this was another feature of Amicus Finance (see also Hurricane and Gategroup).