Scheme of arrangement, Business Law and Ethics

Scheme of Arrangement:

The following sequence of action is necessary:

 (a) application is made to the court (usually by the company itself) for an order that one or more meetings of members and/or of creditors (if the scheme will affect the rights of creditors (if the scheme will affect the rights of creditors) shall be held.  With the application the company submits a document setting out in detail the terms of the scheme of arrangement and also an explanatory statement to be issued with the notice(s) convening the meeting(s).  If the court is satisfied that the scheme is generally suitable for consideration as a "scheme of arrangement" under s.207 it will order that a meeting of meetings be held to consider it.  The court is not at this stage concerned with the details of the scheme nor with the issue (which may arise later) as to whether there are conflicts of interest which require that separate meetings should be held.  The court merely looks at the outline of the scheme and if it seems suitable orders that meeting(s) be held;

 (b) a meeting or several meetings is or are held as the court has ordered.  A substantial quorum, say members (present in person or by proxy) holding one-third of the shares, is required and the scheme must be approved by members (or, as the case may be, creditors) voting at each meeting who-

(i) are a majority in number, and

(ii) represent three-quarters in value of the shares (or at a creditors' meeting, of the amounts owing).

Requirement (ii) is imposed to safeguard a minority in numbers who have a larger financial stake than the numerical majority: Re NFU Development Trust.

Posted Date: 1/15/2013 3:16:49 AM | Location : United States

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