UK Law and Practice Contributed by: Fergus Wheeler, Paul Yin, Tracy Liu and Medha Vikram, Latham & Watkins
make such order as it sees fit to restore the posi - tion to what it would have been if the transaction had not been entered into and to protect the interests of the “victims” of the transaction. 7.7 Set-Off Rights Set-off of mutual debts in insolvency (liquida - tion and administration) is mandatory and self- executing. 7.8 Out-of-Court v In-Court Enforcement See 7.1 Impact of Insolvency Processes for a description of pre-pack sales. Consensual restructurings and semi-consensual restructur - ings (involving some type of enforcement action) are typically effected outside of court unless a statutory creditor compromise is required (see 7.9 Dissenting Lenders and Non-Consensual Restructurings ). 7.9 Dissenting Lenders and Non- Consensual Restructurings Scheme of Arrangement Although not an insolvency proceeding, under Part 26 of the CA06 the English courts have jurisdiction to sanction a scheme of arrange - ment that effects a compromise of a company’s liabilities between a company and its creditors (or any class of its creditors). An English com - pany or, provided certain conditions are met to engage the jurisdiction of the English court, a foreign company may propose a scheme with respect to its financial liabilities. Before the court considers the sanction of a scheme of arrangement, affected creditors will vote on the proposed compromise or arrange - ment in respect of their claims in a single class or in a number of classes, depending on the rights of such creditors that will be affected by the proposed scheme and any new rights that such creditors are given under the scheme.
This compromise can be proposed by the com - pany or its creditors. If a majority in number rep - resenting 75% or more by value of those credi - tors present and voting at the meeting(s) of each class of creditors vote in favour of the proposed scheme, irrespective of the terms and approval thresholds contained in the finance documents, then that scheme will (subject to the sanction of the court) be binding on all affected credi - tors, including those affected creditors who did not participate in the vote and those who voted against the scheme. The scheme then needs to be sanctioned by the court at a sanction hearing where the court will review the fairness of the scheme and consider whether it is reasonable. The court has dis - cretion as to whether to sanction the scheme as approved, make an order conditional upon modifications being made or refuse to sanction the scheme. Once sanctioned, the scheme of arrangement binds all affected stakeholders whose rights will be as set out in the scheme of arrangement, which will be effective (in line with its terms) upon delivery of the court’s order sanctioning the scheme of arrangement to the Registrar of Companies. Unlike an administration proceeding, the com - mencement of a scheme of arrangement does not automatically trigger a moratorium of claims or proceedings. Restructuring Plan Like a scheme of arrangement, a restructur - ing plan is a procedure under Part 26A of the CA06 which allows the English courts to effect a compromise of a company’s liabilities between a company and its creditors (or any class of its creditors), but with the added possibility of a “cross-class cram-down”. While generally avail - able to the same domestic and foreign compa -
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