If your business is facing an insolvency or restructuring proposal, you may be a party to a Part 26A restructuring plan. Likewise, if you are a creditor to a company facing insolvency or restructuring, you may want to familiarise yourself with a Part 26A restructuring plan. This article will explain in simple terms what a Part 26A plan is and when it is relevant. <\/p>\n\n\n\n
Part 26A Plans are a relatively new restructuring tool available to certain companies in England and Wales. The Plans are based on \u2018schemes of arrangement\u2019, which were, until recently, the predominant restructuring process available to a company and its creditors in England and Wales. However, to better understand a Part 26A plan, you may find it helpful to understand where it sits within England and Wales’s larger insolvency and restructuring regime. <\/p>\n\n\n\n
In plain terms, insolvency proceedings<\/a> arise when a company is unlikely to continue trading. As a result, the directors or a court initiate a wind-up process that sells all the company\u2019s assets to repay its creditors. Once the assets have been sold, the company ceases to exist. <\/p>\n\n\n\n On the other hand, restructuring proceedings are available to companies that, according to the court or its creditors, have a chance of \u201ccontinuing as a going concern.\u201d That is to say, once the company can amend the terms of their existing debt and other financial liabilities, it can continue to trade. This allows creditors to exercise their rights against the company. Nevertheless, restructuring proceedings can still result in the court or its shareholders winding up the company<\/a>. <\/p>\n\n\n\n Courts prefer creditors to work together to make a decision during restructuring proceedings<\/a>. Hence, a Part 26A plan is a restructuring process that companies and their creditors can use to refinance and reorganise the company\u2019s debts to continue trading. Additionally, a company and its creditors can use a Part 26A Plan to maximise the proceeds available to creditors if they must eventually wind-up the company. <\/p>\n\n\n\n Under a Part 26A Plan, each class of creditors must agree by 75% or more to the terms of the restructuring proposal. In this sense, Part 26A proceedings allow creditors to meet and negotiate amongst themselves, as well as with the company, to arrive at a consensus.<\/p>\n<\/div>\n\n\n\n A court must sanction a Part 26A Plan. Therefore, the costs and fees associated with a Part 26A Plan are more extensive than other restructuring or refinancing options. <\/p>\n\n\n\n A Part 26A plan is only available to companies seeking to reduce the ability of a company facing serious financial difficulty to \u201ccontinue as a going concern\u201d.<\/p>\n\n\n\n A \u201cgoing concern\u201d is a broad legal and accounting term that refers to a company\u2019s ability to trade and meet any obligations it owes its creditors.<\/p>\n<\/div>\n\n\n\n The law does not define financial difficulty. However, in practice, a company is in financial difficulty when it cannot meet its present or future debt obligations. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nPart 26A Plans<\/h3>\n\n\n\n
Which Companies Are Eligible for Part 26A Plans?<\/h2>\n\n\n\n