What is a members scheme of arrangement?
A members’ scheme of arrangement involves an agreement which affects the rights and obligations of a company and its shareholders. It is a process commonly used in the Mergers & Acquisitions area to acquire all of the shares in a target company.
What are the main steps in a scheme of arrangement?
Key steps in a scheme of arrangement
- Initial Approach.
- Due Diligence.
- Scheme implementation agreement.
- Shareholder disclosure and approval process.
- Court approval and implementation.
What does a scheme of arrangement do?
A scheme of arrangement is typically used to execute a change in the structure of a company, such as during a takeover. It is a court-approved agreement between a company and its shareholders or creditors to allow a bidder to acquire all of the shares in the company.
Who can vote in a scheme of arrangement?
For the Scheme to become legally binding, a majority of creditors within each class must vote, with a majority of 75% (by value) in favour being needed within each creditor class, for the Scheme of Arrangement to take effect.
What happens after scheme of arrangement?
Once a scheme of compromise and arrangement is approved by statutory majority, it binds the dissenting minority. The company, its contributories and also the liquidator who is appointed in case the company is being wound up are bound by the terms of the scheme9.
Is a scheme of arrangement mandatory?
A scheme of arrangement does not require prior approval by a court unless the resolution was opposed by at least 15% of voting rights exercised on the resolution. Any person who voted against the resolution can, if the court grants that person leave, make an application to the court for approval of the transaction.
Who can oppose a scheme of arrangement?
Tulzapurkar can be accepted as Rule 60 simply provides that any person who has not been secured in the manner provided by section 101(2)(c) is permitted to oppose the scheme. It does not provide that if the creditor is secured then the scheme cannot be opposed by him.
Is a scheme of arrangement a merger?
A scheme of arrangement (or a “scheme of reconstruction”) is a court-approved agreement between a company and its shareholders or creditors (e.g. lenders or debenture holders). It may affect mergers and amalgamations and may alter shareholder or creditor rights.
How long does a scheme of arrangement take?
As long as the scheme of arrangement progresses in an uncomplicated fashion, the process could be completed within six to eight weeks of the company making its first application to the English courts. Negotiations involving the commercial terms of the scheme itself lengthen the timetable.
On what grounds can Nclt reject a scheme of arrangement?
Thereafter, upon sanction by the NCLT, the compromise or arrangement becomes binding. However, the NCLT may refuse sanction only in case of non-compliance with sections 232, 230(1) and 68 of the CA2013, and in absence of certificate by the auditor.
What are the tests laid down to ensure that the process of a minority squeeze out is fair and just?
As mentioned earlier, as a weighted factor, a just and fair valuation report which is based on the factors laid down in the Takeover Rules and which meets the test of judicial scrutiny, is a prerequisite to obtaining a sanction from the NCLT.
When can an acquiring company squeeze out the minority shareholders?
Section 236 of the Companies Act, 2013 (‘Act, 2013’) sets out a process of squeezing out minority shareholder whereby any shareholder of the company, either alone or along with person acting in concert, holding 90% or more of the total issued equity share capital, may acquire the remaining equity shares of the company …