Reforming the procedure for Schemes of Arrangement and Restructuring Plans

Earlier this month, the Chancellor of the High Court launched a consultation seeking views on a draft Practice Statement to replace the current Practice Statement (Companies: Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006). The existing Practice Statement was issued in 2020 and outlines the practice to be followed on applications to the Court for sanctioning schemes of arrangement and restructuring plans.  

The consultation calls for comments on the draft Practice Statement to be submitted by Friday 13 June 2025 with the replacement Practice Statement expected to be issued by the end of July 2025. 

The rationale for change: ensuring a proportionate allocation of time and resource

Although the draft Practice Statement is directed equally at schemes of arrangement and restructuring plans, the suggested changes that it proposes have been driven by the rise in urgent, but contested, restructuring plans and aim to mitigate the pressures placed on the Court as a result. 

What are the objectives of the draft Practice Statement?

The objective of the existing Practice Statement was to enable the identification and early resolution of issues concerning (i) the jurisdiction of the Court to sanction the scheme or restructuring plan, (ii) the composition of classes of creditors and/or members, and (iii) the convening of meetings. This was largely driven by difficulties which had arisen with schemes of arrangements long before restructuring plans were first introduced. The draft Practice Statement retains this objective. 

In addition, the draft Practice Statement adds a second objective of facilitating the early identification and active case management of contested issues. The aim being to promote the resolution of such issues in an efficient and orderly manner and involving a proportionate allocation of the Court's time and resources. 

All in the detail: what is changing?

The changes proposed by the draft Practice Statement to achieve its second objective would require:

• the applicant to issue a claim form before they are able to schedule any hearings with the Court. This would prevent the current practice of counsels' clerks informally reserving convening and sanction hearing dates prior to the claim form being issued and thus setting a timetable before the Court is formally able to take control;
• the applicant to provide a listing note alongside the claim form, setting out the proposed timetable, any issues that may impact this timetable and the reasons for any perceived urgency. This would allow the Court to query and if necessary revise the timetable at an early point in the process;
• the applicant's evidence at the convening hearing to identify whether it envisages that the Court will be asked to exercise cross-class cram down at the sanction hearing and if so identify:
  • whether and to what extent those promoting the restructuring plan have engaged with the restructuring plan company's creditors and members;
  • whether there has been any discrepancy in the level of engagement with particular creditors or members and if so why that is so;
  • whether any objection has been received, including whether any alternative restructuring plan has been put forwards, and if so of any remaining disagreement; and
  • what information has so far been provided to creditors or members and where there is any discrepancy in the level of information provided why that is so.

This sets out the minimum level of information that the Court will wish to be told about discussions which have already taken place with stakeholders affected by the restructuring plan, and what has emerged from them;

• any party objecting to a restructuring plan whose objection is likely to affect matters to be considered at the convening hearing to provide the Court with details of their objection as soon as practicable. This will provide the Court with an early warning of any likely opposition and allow it to take this into account in managing the case; and        
• where an issue has been drawn to the attention of the Court and was not considered suitable for determination at the convening hearing, the Court to consider at the convening hearing and/or at subsequent case management hearings what further directions will be necessary for the resolution of that issue in a timely and proportionate manner, whether at the sanction hearing or otherwise. This anticipates the possibility of an interim case management hearing as an alternative either to adjourning the convening hearing or to discovering later that the sanction hearing needs to be adjourned.     

What will the proposed changes achieve?

On larger, more complex restructuring plans, the total sums at stake have encouraged both those supporting and those opposing the restructuring plan to argue their respective positions as comprehensively as possible. At the same time, the Court considers that some such restructuring plans have been launched at an unnecessarily late stage, reducing the time available to manage the process.  A revised practice statement in the form of the draft Practice Statement would doubtless assist the Court here.      

What is less clear is how the changes will make restructuring plans a more viable tool for small and medium size entities. It may be that the Court will start to manage such cases from the outset and limit the evidence that such applicants are required to produce in order to treat other stakeholders fairly, thus reducing the overall cost of the process. However, we know that some advisers were hoping that the restructuring plan process would in time become more streamlined for such companies and perhaps ultimately involve just one, rather than two (or more), Court hearings. Despite the Court’s own wish to reduce demands on its time and resources, this does not presently feel the direction of travel.