UK Law and Practice Contributed by: Kate Stephenson and Zoe Stembridge, Kirkland & Ellis
a genuine economic interest in the company – ie, the class is disenfranchised. If sanctioned, the plan binds all affected stakehold - ers, whether secured or unsecured and whether or not they consented or voted. Arbitration It is not possible to displace the court’s jurisdiction in respect of a scheme or plan through the use of arbitra - tion. It is possible for a scheme or plan to compromise an arbitration award and/or a debt that is subject to an arbitration clause. In theory, it could be possible to use arbitration to determine: • the quantum of a disputed claim to be compro - mised by a scheme or plan; and/or • the treatment of a claim within a restructuring that involves a scheme or plan. However, this is not common and would likely face certain difficulties in practice. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure A scheme or restructuring plan will generally become effective upon the delivery of the sanction order for registration at Companies House. This generally marks the conclusion of the process, unless the scheme or plan is appealed. As noted in 4.2 Statutory Restruc- turing, Rehabilitation and Reorganisation Procedure , the court retains discretion as to whether to sanction a scheme or plan (somewhat akin to a “fairness” test) and will exercise this discretion particularly carefully for a plan that not every class has approved. Failure to observe the terms of an agreed scheme or plan will constitute a breach of contract. A CVA will terminate upon the supervisor checking that all conditions of the arrangement have been ful - filled, and may terminate early if the debtor fails to comply with its obligations. As noted, there is no court involvement unless the CVA is challenged (which prin - cipally occurs on the grounds of “unfair prejudice” or “material irregularity”). An administration terminates automatically after one year (unless extended). There are also a number of
ways to end an administration: administrators’ appli - cation, creditors’ application, conversion to winding- up or dissolution. There is generally no court involve - ment, unless the administrators’ conduct is challenged or the administrators seek the court’s directions.
4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation Schemes and Restructuring Plans
Directors will remain in control of the company’s busi - ness, unless an administrator or liquidator has been separately appointed. There are no restrictions on the debtor’s use of its assets. The debtor can borrow money/seek new fund - ing during a process but must comply with permis - sions under existing debt documentation or include approval for the new funding under the scheme or plan. Following sanction, affected creditors will be able to enforce their claim only as compromised or varied by the scheme/plan. Administration Administrators (who are licensed insolvency practi - tioners) have wide powers to conduct the business of the company in administration, including sale of assets and borrowing in the name of the company. Directors generally lose their usual management pow - ers (except in a so-called “light-touch” administration, in which administrators consent to the company’s management continuing to exercise certain manage - ment powers). CVA Directors continue to manage the business as normal, and there are no restrictions on the debtor’s use of its assets. However, the CVA is overseen by a nominee/ supervisor, who must be a licensed insolvency prac - titioner.
4.5 The Position of Office Holders in Restructuring, Rehabilitation and Reorganisation Schemes and Restructuring Plans
These processes do not involve office holders as such, unless the company is also in administration or liquidation, which is unusual.
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