The departure of the United Kingdom from the European Union, in particular in the case of a "hard Brexit" in which there is no continued bilateral application of EU law, will have many consequences within the European Union.
In contrast to German law, for example, English law provides for a pre-insolvency restructuring instrument, the (solvent) Scheme of Arrangement, which has been widely used by both UK incorporated and non-UK incorporated companies as means of implementing a financial restructuring. The question of recognition of the Scheme of Arrangement as a pre-insolvency restructuring instrument following a possible hard Brexit", in particular in Germany, will be examined below.
This question of recognition is relevant both to:
the exercise of the English court of its discretion to sanction a scheme and the recognition of that scheme by the Courts of a Member State in the event, for instance, that a dissenting creditor asserts that it is not bound by the scheme (for instance, in order to enforce against local assets). II. The Scheme of Arrangement
Subject of this note is the Scheme of Arrangement as a statutory procedure under English law whereby a company under financial pressure may make a compromise or arrangement with its creditors (or any class of them) pursuant to Part 26 of the Companies Act 2006. The process requires the approval (or "sanction") of the English court. Schemes of Arrangement have been used to implement a wide range of restructuring mechanisms, from a simple compromise (such as deferment of debt) to a more complicated structure (such as a debt-for-equity swap).
Although the Companies Act is a set of rules directly applicable in England and Wales, Scotland and Northern Ireland only, the Scheme of Arrangement set out therein has often been used for restructuring purposes in other countries, in particular in Germany, as well.
In contrast to insolvency proceedings governed by German law, which also requires at least the threat of insolvency, in the case of a Scheme of Arrangement there is no requirement for the company to be insolvent. Also, if a company implements a scheme of arrangement it is often the case that day-to-day administrative and disposition powers remain with the company.
If the English court is satisfied that it has jurisdiction to sanction the Scheme of Arrangement, it then has discretion as to whether to do so. In practice, the English court will exercise its discretion to sanction a Scheme of Arrangement for a foreign company only, if:
there is a sufficient...
Scheme Of Arrangement - Acknowledgment In Germany Post Brexit
|Author:||Dr. Marco Wilhelm, Dr. Malte Richter, LLM and Tina Hoffmann|
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