Thought Leadership

In June 2020, the UK adopted the Corporate Insolvency and Governance Act (CIGA), making several permanent changes to its restructuring and insolvency laws.  Building on the success of restructuring finance debt through the scheme of arrangement procedure (which is not an insolvency procedure) under Article 26 of the Companies Act 2006 of England and Wales, CIGA added a new non-insolvency restructuring plan process (RP Process) as Article 26 A of the Companies Act.  Under the existing Article 26, a scheme of arrangement binds all creditors in classes that accept the scheme by a majority in number representing 75% in amount of affected debt, but it does not affect non-accepting classes.  Under the new Article 26A, the RP Process requires that at least one class of affected creditors accept the plan by a majority of 75% in amount (with no numerosity requirement).  The RP Process further permits non-accepting classes to be bound in certain circumstances so long as at least one class has accepted. The attached report by CBI Principal Dan Glosband discusses the English scheme of arrangement and RP Process in more detail.  While quite new, the RP Process has already been used successfully by Virgin Atlantic Airways and Pizza Express.

By the way, the first section of the Report is essentially “Schemes in a Nutshell”, providing a concise refresher on how schemes work.