Require Immediate Support? Free Director Helpline: 0800 644 6080

Real Business Rescue

Free Director Helpline: 0800 644 6080

Scheme of Arrangement: Process and Procedure



Written by: Jonathan Munnery

What is a Scheme of Arrangement?

A Scheme of Arrangement helps an indebted company restructure its liabilities, and aids recovery from financial distress. It is not a formal insolvency process and is covered by the Companies Act 2006 rather than the Insolvency Act 1986. Despite this, it must still be sanctioned by court process.

Creditors will be invited to vote on any proposed scheme, and will be divided into 'classes' of creditor as part of the process. Once voting on the scheme has taken place and the required number of creditors has agreed to it being implemented, the arrangement is binding on all creditors even if they voted against it or chose not to vote at all.

Although Schemes of Arrangement can be proposed by an administrator or liquidator, the company’s creditors, or its members, it is often the company that makes the proposal.

background curve

Take Our Free 60 Second Test

Get an instant understanding of your:

  • Debt and Asset Position
  • Formal Insolvency Options
  • Next steps

Plus much more ...

Start The 60 Second Test
apps on mobile screen

What is the Scheme of Arrangement process?

  • Once a Scheme of Arrangement has been identified as a viable tool for a company, negotiations take place with regard to restructuring its debt. The court calls a ‘Class Hearing’ to establish that the classes of creditor are correct.
  • Creditors are divided into classes, for example those with a fixed charge, unsecured creditors, or those with common characteristics. For the Scheme to become legally binding, a majority of creditors within each class must vote, with a majority of 75% (by value) in favour being needed within each creditor class, for the Scheme of Arrangement to take effect.
  • Creditors are notified of the first creditors’ meeting and receive an explanatory statement (ES) detailing the proposals to be included in the Scheme. Each class of creditor holds its own meeting.
  • If sufficient creditors in each class vote in favour of the Scheme, either in person or by proxy (more than 50% in number and 75% by value), the court holds a ‘Sanction/Fairness Hearing’ and considers representations from all relevant parties.
  • If the court deems it unfair, it can refuse to sanction the Scheme of Arrangement - one of the most contentious areas at this point is whether creditors have been classified correctly.
  • There is no automatic moratorium period or protection from creditor legal action when a Scheme of Arrangement is used, unless the company is placed into administration first. The Scheme can then be used as an exit from administration.
  • Once sanctioned, a court order is sent to the Registrar of Companies, and the Scheme becomes effective. Creditors must then submit a proof of debt form within three months.

UK’s number one for director advice

We handle more corporate insolvency appointments than any other UK firm; demonstrating our commitment to helping directors and business owners in financial distress.
The team are available now -  0800 644 6080

60 Second Test Find Your Nearest Office

What are the benefits of using a Scheme of Arrangement?

  • A company can avoid the negative publicity and loss of goodwill that is generally associated with procedures under the Insolvency Act, 1986
  • A Scheme is binding on all creditors within their class once sanctioned by the court
  • This type of arrangement allows a company to continue trading, thus benefiting both its shareholders and creditors
  • It offers greater flexibility and selectivity when compared with some formal insolvency procedures
  • The use of a Scheme of Arrangement means that directors do not have the obligation to report under the Company Directors Disqualification Act, 1986 (CDDA)

Need to speak to someone?

If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080

Are there any disadvantages?

  • There is no moratorium period to protect the company unless it enters administration first
  • Even when sufficient creditors have agreed to the Scheme, it still requires court approval
  • Schemes of Arrangement are generally more expensive than insolvency procedures such as Company Voluntary Arrangements (CVAs), due to their added complexity

Real Business Rescue can provide further detailed guidance on the use of Schemes of Arrangement, and whether they are appropriate for your company’s situation. This is a complex area that requires professional support from a licensed insolvency practitioner. 

reviews io logo

Real Business Rescue are here to help

Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.

  • UK’s Largest Liquidators
  • 100+ Offices Nationwide
  • 100% Confidential Advice
  • Supported 25,000+ Directors
Meet The Team
Team Of 4

Team of Qualified Experts

Trusted team of experts on hand to assist

Meet The Team
Rbr Accreditations Blue

Looking for immediate support?

Complete the below to get in touch

Here at Real Business Rescue we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY
10,000+ Tests Completed

Free 60 Second Test

For Ltd Company Directors

Get An Instant Understanding Of Your:

  • Debt and Asset Position
  • Director and Liability Review
  • Next Steps

Plus much more ...

Real Business Rescue Recommended
  • UK's leading business funders
  • Free Brokerage Service
  • Full Market Access
  • Over 30 years' experience
  • Strong relationships with HMRC
  • Support from start to finish
  • 10,000 potential buyers
  • 12,000+ Businesses Sold
  • 60+ Years Experience
Next Steps

We provide free confidential advice with absolutely no obligation.
Our expert and non-judgemental team are ready to assist directors and stakeholders today.