Reflections on English Law Schemes of Arrangement in Distress and Proposals for Reform
25 Pages Posted: 8 Mar 2017 Last revised: 21 Mar 2017
Date Written: March 3, 2017
The English scheme of arrangement process has, in many ways, proved a reliable friend to distressed companies and their majority finance creditors in the crisis. However, experience of using the scheme process to achieve a debt restructuring during the crisis has highlighted a number of areas where it could be improved for the present, or to make it more adaptable in the future. The Insolvency Service has launched a review of the corporate insolvency framework in the UK (and has published many of the responses which it has received to the consultation), and the European Commission has published a proposal for a new Directive setting minimum harmonisation standards for restructuring law. Both the consultation and the proposal go beyond reform of schemes of arrangement, but both have significant implications for the reform of schemes. This paper focuses on the introduction of a preliminary moratorium as a gateway to restructuring efforts, the crucial question of how to value the enterprise if a cram down mechanism is introduced and the role of the insolvency practitioner in the scheme context.
Keywords: Scheme of Arrangement; Financial Distress; Corporate Insolvency; Debt Restructuring; Insolvency Law Harmonisation
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