Schemes of Arrangement and Restructuring of Companies: : A Viable Alternative to Other Restructuring Tools in Corporate Law

Almasoud, Yazid and Milman, David and Akintola, Kayode (2019) Schemes of Arrangement and Restructuring of Companies: : A Viable Alternative to Other Restructuring Tools in Corporate Law. PhD thesis, Lancaster University.

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Abstract

Due to globalisation of trade and the growth of diverse, competitive and volatile markets, companies have for many decades developed and adapted, expanding their structures into a complex web of operations with varied roles, purposes and management needs. There is no single ‘type’ of corporation, nor any ‘one size fits all’ list of what each individual organisation will require during its cyclical life. Company law frameworks have therefore sought to accommodate multifarious demands for the fostering of a vibrant commercial domestic, regional and international market environment. Restructuring imperatives may be a result of expansion or potential demise occasioned by financial strain or other economic challenges and the need for rescue to preserve the value of business organisations to domestic economies. Complex, ‘single purpose’ restructuring processes have traditionally dealt with mergers, acquisitions, takeovers and, more recently, insolvency. In the case of financial distress, most developed jurisdictions adopted a ‘scheme of arrangement’ procedure to facilitate renegotiation, refinancing and rescue, as well as a proposal to reorganise liabilities and indeed effect organisational restructure. Schemes of arrangement has proven to be more flexible and has been adapted to manage institutional change. This has been particularly valuable in the rationalisation of complex multinational conglomerates, facilitating continued expansion, be it generically or by takeover. This study examines the framework and use of schemes of arrangement as an effective mechanism for companies of all sizes and formations to restructure their liabilities and operations in diverse national jurisdictions, with particular focus on the UK and the KSA. The other processes may continue to have their uses, but the scheme provides a relatively simple structure in the face of significant complexity. It is monitored by the courts with only limited intervention in what are essentially business decisions of the management supported by the special majority of those affected. Indeed, the relatively ubiquitous use of schemes of arrangement as a corporate legal service has proven to be an attraction for corporations seeking the jurisdiction most amenable to their plans ‘forum shopping’. It is thus a valuable marketing tool for economies in attracting company operations to the provider country. To achieve this, the KSA, a major focus of this study, has made substantial changes to the basis of its economy and reformed its bankruptcy law to facilitate corporate needs by the introduction of a scheme of arrangement framework accommodating Shari’a principles for a global market awash with opportunity as well as risk.