Scheme of Arrangement

A term normally used to describe a compromise or arrangement between a company and its creditors or members or any class of them under Section 425 of the Companies Act 1985, which may involve a scheme for the reconstruction of the company. If a majority in number representing three-fourths in value of the creditors or members or any class of them agree to the compromise or arrangement it is binding if sanctioned by the court. Section 425 may be invoked where there is an administration order in force in relation to the company, where there is a liquidator or provisional liquidator in office or where the company is not subject to any insolvency proceedings. The term is also used in section 1 of the Insolvency Act 1986 in relation to company voluntary arrangements.

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