Chapter 16 - Company Restructuring Flashcards

1
Q

What is the most common use of the IA1986 s110 scheme of reconstruction?

A

A company wishing to demerge one or more of its businesses.

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2
Q

Can s 110 be used if a compromise is sought with creditors?

A

No, a part 26 scheme must be used instead.

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3
Q

Is a s 110 scheme a corporate rescue solution?

A

No, it is intended only for use in a solvent company.

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4
Q

Which member resolutions are required to put a typical s 110 scheme of demerger in place?

A

Special resolutions for:

  • to wind up the company
  • to appoint a liquidator
  • to approve a s 110 scheme of reconstruction
  • to authorise the liquidator to carry out the s110 scheme of reconstruction.
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5
Q

What are the two types of voluntary winding up?

A

1 Members voluntary winding up

2 Creditors voluntary winding up.

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6
Q

What happens if a member does not agree to the s110 scheme?

A

They have the right within 7 days to require the liquidator to buy their shares (s 111 IA).

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7
Q

What is a CA 2006 Part 26 Scheme of Arrangement?

A

A scheme to facilitate changes to the rights of creditors or members without securing the unanimous approval of those affected by the changes.

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8
Q

Identify the three basic stages in a CA 2006 Part 26 procedure.

A

1) Application to the court for an order that meetings be summoned of every affected class of shareholders and creditors for the purpose of securing approval for the scheme
2) The court-ordered meetings are summoned by giving notice to those affected. A 75% majority of each class of members or creditors must be achieved to continue.
3) A second application to the court, asking the court to sanction the approved scheme.

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9
Q

Why are Part 26 schemes of arrangement rarely used?

A

The process is cumbersome, expensive and slow.

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10
Q

What is it that s 897 requires an explanatory notice delivered to those entitled to attend a court-ordered meeting to explain?

A
  • the effect of the arrangement
  • any interests of the directors
  • the effect of the compromise on those interests
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11
Q

How does the court approach the question of whether a sub-group of creditors or shareholders is a separate class or not?

A

Those whose rights are so similar that it must not be impossible for them to consult together with a common interest.

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12
Q

What is the essential character of corporate reconstruction for s 900 purposes?

A

s 900 extends the powers of the court in a Part 26 Scheme of Arrangement to allow the court to order a broad range of matters.

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