Arrangements and reconstructions for companies in financial difficulty
These provisions will allow struggling companies, or their creditors or members, to propose a new restructuring plan between the company and creditors and members. The measures will introduce a "cross-class cram  down" feature that will allow dissenting classes of creditors or members to be bound to a restructuring plan. This means that classes of creditors or members who vote against a proposal, but who would be no worse off under the restructuring plan than they would be in the most likely outcome were the restructuring plan not to be agreed cannot prevent it from proceeding.
	These provisions introduce a new Part 26A into the Companies Act 2006: Arrangements and Reconstructions for Companies in Financial Difficulty (a ’restructuring plan’). The new Part represents the culmination of the policy work undertaken since a restructuring plan procedure for companies was consulted on as part of "A Review of the Corporate Insolvency Framework", published in May 2016. 1
	There are currently two statutory mechanisms for a company to reach a compromise or arrangement with its creditors; an arrangement or reconstruction under Part 26 of the Companies Act 2006 (known as a ‘scheme of arrangement’) and a CVA under Part 1 of the Insolvency Act 1986 (Part 2 of the Insolvency (Northern Ireland) Order 1989).
	At present CVAs are used by companies looking to restructure, but they cannot affect the rights of secured creditors or preferential creditors without their consent.
	The scheme of arrangement framework is highly regarded and has proved a flexible tool in recent years. In addition to use by domestic companies, a number of overseas companies have also used a scheme of arrangement in the UK to effect restructurings, where they have been able to show a "sufficient connection" to the jurisdiction.
	In schemes of arrangement creditors (and sometimes members) are divided into classes (based on the similarity of their rights, which may vary significantly across a company’s creditor base) and each class must vote on the proposed scheme. If all classes vote in favour of the scheme (requiring 75% by value and a majority by number of each class), the court must then decide whether to sanction it. Not all creditors or members of a company need to be included within a scheme. A company may propose a scheme in such a way as to exclude some creditors or members from it. Those creditors or members who are not bound by the scheme retain their existing rights.
	The new restructuring plan procedure is intended to broadly follow the process for approving a scheme of arrangement (approval by creditors and sanction by the court), but it will additionally include the ability for the applicant to bind classes of creditors (and, if appropriate, members) to a restructuring plan, even where not all classes have voted in favour of it (known as cross-class cram down). Cross-class cram down must be sanctioned by the court and will be subject to meeting certain conditions. As is the case with Part 26 schemes, the court will always have absolute discretion over whether to sanction a restructuring plan. For example, even if the conditions of cross-class cram down are met, the court may refuse to sanction a restructuring plan on the basis it is not just and equitable. As long as the eligibility criteria for the new moratorium are met, it will also be available (but not mandatory) to use whilst the company develops a restructuring plan thereby providing a streamlined restructuring process and allowing a restructuring plan to be developed free from enforcement action.
	While there are some differences between the new Part 26A and existing Part 26 (for example the ability to bind dissenting classes of creditors and members), the overall commonality between the two Parts is expected to enable the courts to draw on the existing body of Part 26 case law where appropriate.
	The Act also revives a previously lapsed power in Great Britain to regulate sales in administration to connected persons and introduces a similar new power in Northern Ireland. The intention is to provide for greater scrutiny of what are known as "pre-pack sales", where the sale of the company’s business is negotiated and arranged prior to the appointment of the administrator, with the actual sale taking place immediately or very shortly after the appointment of the administrator. Such sales are often to directors of or persons connected with the former insolvent company and can be controversial as creditors may be unaware until after the transaction has been completed.