Schemes of arrangement

Overview

Any company hit by financial distress could find itself losing the trust of its creditors. If that happens, we can put a scheme of arrangement (SoA) in place to remedy that situation. An SoA works by giving binding effect to a contractual arrangement between creditors and the company which is sanctioned by the Court to be effective and is intended to provide reassurance to creditors.

In practical terms, creditors (at least 75% in value and 50% in numbers) must vote in favour of an SoA, after which the company and creditors are bound by the terms of the agreement pursuant to Court sanction.

The flexibility of an SoA means creditors can approve restructuring of a debt, or other acceptable compromises, with the company.

Our business recovery specialists have put together various SoAs in Hong Kong and are equipped to advise on all their aspects and act as scheme administrators.

 

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Potential issues

  • you are a creditor of a failed business, where the majority of creditors share similar views towards the potential restructuring or recovery options
  • you are a creditor looking for a relatively speedy recovery as an alternative to conventional liquidation
  • you are a business owner, board member or senior manager of a distressed business facing the risk of legal proceedings, and are interested in retaining control and looking to negotiate a debt restructuring plan with creditors.

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Support

  • recommend terms of an SoA, including preparation of a proposal for the creditors and shareholders
  • identify potential investors for the SoA
  • negotiate the SoA among creditors, the company and potential investors
  • apply to Court for sanctioning of an agreed SoA
  • administer the implementation of an approved SoA by acting as scheme administrators
  • potential savings of both time and cost compared with liquidation.

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Our experience

  • Acting as the scheme administrator of the Hong Kong subsidiaries of a failed Australian insurer in provisional liquidation. The SoA was implemented to accelerate payments to creditors. In turn this produced cost savings vis-a-vis a liquidation of the company, which can involve insurance claims which may take several years to crystallise.
  • Appointed as the scheme administrator of a company placed in liquidation in Hong Kong and the British Virgin Islands which operated a ‘fund of funds’ hedge fund. The SoA was implemented to speed up distributions to creditors and members compared with the alternative of concurrent cross-border liquidations involving complex, and separate judiciary systems – an alternative which may have substantially delayed the handling of claims and subsequent distributions.

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Related services

Contact us

Ted Osborn
Restructuring and insolvency Leader
Tel: +[852] 2289 2299
Email

Victor Jong
Partner
Tel: +[86] (21) 2323 3650
Email

Christopher So
Partner
Tel: +[852] 2289 2577
Email

Marie Rowbotham
Director
Tel: +[852] 2289 2504
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