Schemes of Arrangement make for an attractive alternative to the more traditional route of a formal takeover.
Many companies are nervous about undertaking a formal takeover. A takeover bid comes at a considerable expense, which must be paid even if the bid fails. Additionally, to meet the requirements for compulsory acquisition, the offeror must gain control of 90% of the target company’s voting rights. This carries a high amount of risk.
No longer seen as a loop hole, Schemes of Arrangement are overseen by the Takeovers Panel and have experienced a marked resurgence over the past few years. The Takeover Panel is now supportive and will file a no-objection statement in most cases, even where the transaction is effectively a takeover that could otherwise been done through the code.
Less daunting than a takeover, a Scheme of Arrangement carries a number of benefits. They are more able to be tailored to meet the individual needs of the companies involved and can be coupled with other transactions. Schemes of Arrangement can be passed by a 75% majority in each interest class of shareholder and a simple majority resolution of all shareholders.
The most well-known example is the Allnex and Nuplex Scheme of Arrangement, which in 2016 resulted in the full takeover of Nuplex and the existing shareholders exiting for agreed payments.
For further information and advice on schemes of arrangement, please contact Mark Copeland Lawyers, in Rotorua and we can help guide you through the process.