Schemes of arrangement

In our previous blog post, we examined the decision of the New South Wales Court of Appeal to uphold the composition of classes of creditors in the Boart Longyear restructuring by way of scheme of arrangement.

Following an extensive second court hearing to approve the schemes of arrangement (which involved multiple days of hearings, several adjournments, and a court-ordered mediation), amended versions of the Boart Longyear schemes have now been approved by the Australian courts.

The decision emphasises the importance of the court’s overall “fairness” discretion in approving a scheme, irrespective of whether classes of creditors have been properly constituted. Importantly, differential treatment within a class of creditors that may not be sufficient to justify the creation of a separate class may nonetheless create sufficient unfairness to cause the scheme to ultimately fail. Significantly, the court was clear in its final judgment that the schemes as initially drafted would not have passed the “fairness” test and would have been rejected.

Continue Reading Update – Boart Longyear schemes of arrangement approved

This article first appeared in the Summer 2017 edition of Recovery Magazine and is published here with their kind permission.

The Companies Act scheme of arrangement – now set out in part 26 of the Companies Act 2006 (CA 2006), has come a long way.  Long gone are the times when schemes of arrangement – never an Insolvency Act process – were merely seen as tools for implementing solvent reorganisations. Schemes of arrangement are nowadays one of the most favoured means for rescheduling, reorganising or otherwise compromising the liability of companies to their creditors in complex multijurisdictional restructurings.

English schemes are popular because of the breadth and flexibility of the legislative provisions and their low jurisdictional threshold. Additionally, the courts take a robust and pragmatic approach to the proponents and opponents of the part 26 process. This article summarises four examples of that pragmatism in action.  Click here to read the full article.

 

In one of the most significant decisions relating to schemes of arrangement in Australia in recent years, the New South Wales Court of Appeal has dismissed an appeal challenging the composition of classes of creditors in the Boart Longyear restructuring.

The decision significantly widens the extent to which creditors within the same voting class may be treated differently, both in terms of their existing rights and their rights under the proposed scheme. As a result, the decision may lead to greater flexibility for stakeholders and distressed companies seeking to devise restructuring plans via scheme of arrangement. Continue Reading New South Wales Court of Appeal upholds Boart Longyear scheme classes decision

The Copenhagen Re case was an application to the Court to sanction a scheme for the transfer of insurance business pursuant to Part VII Financial Services and Markets Act 2000. In the main, Snowden, J’s ruling is a restatement of the well-recognised grounds upon which the Court will exercise its discretion to sanction a transfer scheme. The ruling nevertheless goes further, in that it is the first occasion where the Court has had to consider how to deal with the effect of a transfer scheme upon guarantees given by the transferor’s parent company in respect of policies written through the Institute of London Underwriters. Snowden, J held that he had the power under Section 112(1)(d) FSMA 2000 to modify the guarantees given to the ILU by Copenhagen Re’s parent.  The effect of the modification was that the original guarantee remained in place but on terms that the guaranteed obligations were modified by the court to become those of the transferee under the scheme, Marlon Insurance Company Limited.  Continue reading