UK Law and Practice Contributed by: Kate Stephenson and Zoe Stembridge, Kirkland & Ellis
tors may propose a CVA. A proposal for a CVA should nominate a person to supervise its implementation, who must be a qualified insolvency practitioner. When an administrator or liquidator makes a proposal for a CVA, they will normally also act as the nominee/super - visor. A CVA is proposed by delivering the relevant proposal to court, accompanied by a report from the nominee stating that the CVA has a reasonable pros - pect of being approved and implemented. Eligibility/Group Companies Administration, schemes, restructuring plans and CVAs are available to corporate entities and LLPs. There are different procedures for individuals. Each company in a corporate group is treated as a single entity and its directors are required to consider the interests of creditors in relation to that particular com - pany (rather than the group as a whole). The UK does not have a formal concept of group proceedings/joint debtors, nor substantive consolidation. In July 2023, the UK announced its intention to adopt the UNCI - TRAL Model Law on Enterprise Group Insolvency, but this has yet to be implemented. 4.2 Statutory Restructuring, Rehabilitation Schemes and restructuring plans can effect a broad range of compromises, including those of financial and operational creditors (including secured creditors) and shareholders. They can also compromise claims against third parties (non-debtors) where necessary in order to give effect to the arrangement proposed for the disposition of debts and liabilities of the company to its own creditors. It is well established that it is permissible to release creditors’ claims against guar - antors and persons involved in the preparation, nego - tiation or implementation of a scheme (or restructuring plan) and their legal advisers. The release through a scheme/plan of claims by the scheme/plan company against its own officers and advisers – as potential assets in any future insolvency proceedings of the scheme/plan company – may not be justified as being “necessary”. and Reorganisation Procedure Scope of Potential Compromise Only affected stakeholders are invited to vote on the scheme/plan; the company can select those to whom it proposes the compromise, but must disclose
which of its stakeholders it has excluded, and any such exclusion must be on reasonable commercial grounds. Typical Timeline/Milestones A scheme or restructuring plan typically proceeds as follows. • The restructuring terms are agreed and a lock-up agreement is typically executed. Scheme/plan documents and key restructuring documents are drafted over four to eight weeks (depending on the complexity of the transaction). • At least three weeks before the first court hearing (known as the “convening hearing”), a practice statement letter is circulated to affected stake - holders, which provides a high-level overview of the proposed scheme/plan and proposed voting classes. • The first convening hearing is held, at which the debtor seeks an order to convene the meeting(s) of creditors/shareholders for voting purposes. Affect - ed stakeholders can raise challenges in court. • Notice of creditor meetings and scheme/plan doc - umentation are provided to scheme/plan creditors shortly after the convening hearing. This includes a detailed explanatory statement describing the proposed scheme/plan. • Stakeholder meetings are held three to four weeks later, at which affected stakeholders vote on the scheme/plan. • The second court hearing (known as the “sanc - tion hearing”), at which the court is requested to approve or “sanction” the scheme/plan, is held a week or so after the stakeholder meetings. Again, affected stakeholders may appear to raise chal - lenges. • If the court sanctions the scheme/plan, the scheme/plan will generally become effective once the relevant order is delivered to Companies House for registration, or otherwise in accordance with its terms. The English court is cautious to ensure that its order is not in vain and therefore any remain- ing conditions precedent must be limited to none; otherwise, the court may decline to sanction the scheme/plan unless and until the remaining condi - tions precedent have been satisfied or waived.
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