What is it?
A new form of restructuring plan (RP) which can be entered into with all creditors. It is found within the Corporate Insolvency and Governance Bill (Bill) and assuming it is enacted in its current form, it will sit next to schemes or arrangements in the Companies Act 2006 (rather than the Insolvency Act 1986) by way of a new Part 26A, ss895-901, and as with a scheme of arrangement the RP will seek to achieve an agreed compromise / arrangement between a company, its members and/or its creditors.
However the RP is only available where the company has encountered, or is likely to encounter, financial difficulties that are affecting, or will or may affect, its ability to carry on business as a going concern and the RP’s purpose is to eliminate, reduce, prevent or mitigate such financial difficulties.
As only six sections of the Companies Act cover the RP, the statutory material on this is relatively brief. Consequently the explanatory notes to the Bill make it clear that the intention is that the RP process will largely mirror Part 26 Schemes of arrangement save of course for where there are specific departures from it. It is expected that where the new legislation requires interpretation, existing case-law surrounding the Part 26 Schemes of Arrangement will be of significance. Continue Reading