Scheme of Arrangement Legal Definition

If the court approves the program at the second hearing, it becomes binding on the target company and all its shareholders if court orders are filed with ASIC (usually before the next business day), including target shareholders who voted against the program or did not vote at all at the program meeting. The first step in the system process is usually for the bidder to approach the target with an indicative offer to propose a system in which the bidder would acquire 100% of the target company. The arrangement scheme has become increasingly popular in recent years, as “takeovers” of Australian listed companies are preferred. Therefore, the implementation of a program typically takes approximately four months from the date of the bidder`s first target approach, but can take up to six months or more if thorough due diligence is conducted prior to the program announcement or if extended regulatory approvals such as FIRB and ACCC are required. It is important to take into account in the timing of a system that courts are usually closed from mid-December to early February, which can significantly delay the first or second hearing. Before the program proposal is publicly announced, the bidder and target company will generally enter into an “agreement to implement the program” that: If the target shareholders approve the program, the target company will seek court orders approving the program at the “second court hearing.” The arrangement scheme is used to effect arbitrary changes in the structure of a company and is therefore used when a reorganization cannot be achieved by other means. They can be used, among other things, for debt restructuring, acquisitions and capital returns. The scheme implementation agreement typically includes “transaction protection mechanisms” such as: The general timetable for a plan of arrangement is not required by law, but legal requirements include: In South Africa, the relevant provisions for the implementation of a plan of arrangement are contained in sections 114 and 115 of the Companies Act No. 71 of 2008.

In Australia, the relevant provisions for the implementation of a plan of arrangement or reconstruction are contained in Part 5.1 of the Companies Act 2001 (Cth). Following the public announcement of the program, the target company (with the assistance of the bidder) will prepare a disclosure document called a “plan booklet” to obtain shareholder approval. The program brochure will include an independent expert report evaluating Target`s actions and assessing whether the program is in the “best interest” of Target shareholders. 2. An agreement between a debtor and its creditors to settle the debtor`s affairs to the satisfaction of creditors. The debtor usually accepts such an agreement to avoid bankruptcy (see bankruptcy law). If the composition is agreed even if no bankruptcy order has been made, it may take the form of an ordinary private contract or an adaptation deed. A composition concluded after the issuance of a bankruptcy order is subject to the statutory provisions on bankruptcy (see voluntary agreement). The target will then hold shareholder votes on program approval at the plan meeting. The programme brochure usually contains all the information known to the target company and the bidder that is essential for a target shareholder`s decision to vote on the proposed system. In the United Kingdom, the relevant provisions for the implementation of a plan of arrangement are contained in Part 26 of the Companies Act 2006 (sections 895-901) and Part 27 (special rules for public companies).

For the program to be approved, a resolution must be passed in favour of each class of target shareholders at the system meeting: contact me for a free and confidential consultation. Warren is our Director of Corporate Finance Restructuring Services and an expert in audits, settlement plans and liquidations. More 1. An agreement between a company and its shareholders or creditors to restructure the business in any way; The procedure is mainly used when the company is experiencing financial difficulties or is taking control. It must be approved by a numerical majority (75%) of these creditors or members at separate meetings and approved by the court. All creditors or members participating in the plan are bound by it, although the court may make special arrangements for those who deviate from it. Agreements with creditor companies are often more practical to conclude through a voluntary agreement. Delisting of the target company from the ASX generally occurs shortly after the implementation of the program.