Disadvantage of a scheme of arrangement, Business Law and Ethics

Disadvantage of a scheme of arrangement:

The disadvantage of a scheme of arrangement is that it requires the preparation of elaborate documents and the observance of a strict procedure, including an initial and final application to the court and the holding of meetings.  All this is expensive.  Hence a scheme of arrangement is only suitable for large companies where substantial values or assets are affected.  Otherwise it is uneconomical.

 If a company which is or is about to be in voluntary liquidation proposes to make a composition with its creditors it has a choice between the following alternatives:

(a) a scheme of arrangement under s.207;

(b) an arrangement sanctioned by three quarters (in number and in value) of the creditors under CA: s.300.  This liquidation procedure is binding on a minority unless the court on the application of a creditor or contributory (member) orders otherwise;

(c) a compromise made by the liquidator in exercise of statutory powers under CA, s.241 or s.297(1)(a).  For this purpose he must obtain approval of members, creditors, committee of inspection or the court according to the circumstances of the case.

Posted Date: 1/15/2013 4:14:40 AM | Location : United States







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