[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN ENGLAND] 34
proposed by a company which binds all creditors if approved by the requisite majority of creditors (75% by value) and members (50%). No court application is required (although certain court filings are required) but the arrangement may be open to challenge, usually on the bases of unfair prejudice or material irregularity. This procedure has been used extensively by tenants with multiple leases to vary lease terms. 5.2. Schemes Like company voluntary arrangements, these involve a compromise between a company and its creditors which binds all creditors once in place. The company must apply to court to propose classes of creditors (and if appropriate members) with sufficiently similar interests, and for which it proposes to hold meetings to consider the proposal. The various class meetings are held. If approved by 75% in value of each class of creditors, the company can return to court for sanction. Once sanctioned, the company files the court order at Companies House (the UK companies registry), and the scheme takes effect. 5.3. Restructuring plans These are similar of arrangement: to schemes of arrangement but if the proposal is not approved by all classes of creditors (and if appropriate members) the court can still sanction the scheme if certain conditions are met. Those conditions are, essentially, that no class of creditors (or members) are worse off than would be the case on the most likely alternative, and that at least one class of participating creditors has voted in favour of it.
6. Other options for secured creditors- companies and personal debtors 6.1. Receivership: Lenders with a fixed charge on real property, shares, or other assets, will be entitled to enforce their security in accordance with its terms. Enforcement provisions would usually include the right, after loan default, to appoint receivers over a property. Receivers need not be insolvency practitioners (but often are). They have power to collect rents and, with well drafted security, to sell property. This is a contractual remedy which does not involve a formal collective insolvency of a company (or an individual). It is now (with limited exceptions) only available for enforcement of fixed charges and so is only usable for specific property where the lender has sufficient control. 6.2. Mortgagee sales: In smaller cases,
lenders may sell secured assets as mortgagee. That will save them the cost of a receiver’s fees. However, as there are duties and potential liabilities attached to acting as a receiver, this option would often be undesirable for complex cases.
7. What are the options for individuals 7.1. Bankruptcy: Individuals can be made
bankrupt by court order on application of creditors or by the individual. A trustee in bankruptcy will then be appointed. Generally, that will, at least initially, be the official receiver (see above) but the matter can be appointed out to a private insolvency practitioner. All of the bankrupt’s property will vest in the trustee in bankruptcy who may realise this to meet liabilities of the bankruptcy
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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