Bermuda Schemes Of Arrangement: Delivering Global Restructurings And Reorganisations

Quick Read - Bermuda Schemes of Arrangement

What is it?

A compromise or arrangement between a company and a class or classes of its creditors and/or shareholders. Similar to an English scheme of arrangement under Part 26 of the Companies Act 2006 or a Hong Kong scheme of arrangement under Part 13, Division 2 of the new Companies Ordinance. What is it used for?

Effecting solvent reorganisations of a company or group structure, including by way of merger or take-private, and insolvent restructurings by way of a debt-for-equity swap or other debt-reduction strategy. Who can use it?

Any company incorporated in Bermuda, including companies which have their operations overseas and are listed on an overseas stock exchange. What are the voting requirements for a scheme?

A scheme requires at least 50% in number representing 75% in value of those voting in each class to approve the proposed scheme. What about dissenting creditors / shareholders?

Provided the requisite statutory majorities have been obtained at the scheme meetings, and the Bermuda Court has sanctioned the scheme, the scheme will be binding on all affected stakeholders within the same class, regardless of whether they voted in favour of the scheme or at all. Is Chapter 15 recognition available?

Yes. The process for obtaining Ch. 15 recognition and orders giving full force and effect to the Bermuda Scheme in the US is relatively straightforward. How much does it cost?

Typically less expensive (in terms of legal expenses) than a 'full service' reorganisation procedure such as Ch. 11 proceedings. The structure imposed by the statutory regime means that a scheme can often also be less costly than ad hoc restructuring efforts. How long does it take?

A straightforward scheme can be completed in 6 to 8 weeks (from the date the application is filed with the Bermuda Court to the date on which the scheme is sanctioned). The Bermuda Court

The Supreme Court of Bermuda has extensive commercial, insolvency and restructuring experience. The Bermuda judiciary is made up of highly respected judges, many of whom have a private practice background in cross-border restructuring and schemes of arrangement. Quick Read - Provisional liquidation in Bermuda

What is it?

An insolvency process subject to the supervision of the Bermuda Court. Often used to provide a protective 'wrapper' in a restructuring context, shielding the company from creditor claims while the company formulates and implements a restructuring proposal. The 'liquidation' terminology is somewhat of a misnomer - if a restructuring is successful, the provisional liquidators will be discharged and the restructured company will continue on as a going concern. What about adverse creditors?

The appointment of provisional liquidators invokes an automatic statutory moratorium on creditor claims, although it does not prevent secured creditors from enforcing their security. Who can use it?

Any company incorporated in Bermuda, including companies which have their operations overseas and are listed on an overseas stock exchange. What powers do provisional liquidators have?

Powers are bespoke to the facts and requirements of each provisional liquidation, and are set out in a formal Court Order. How are appointees selected?

Typically both local and foreign insolvency practitioners will be appointed, particularly if the subject company has significant operations overseas or is listed on a foreign stock exchange. What is a 'light-touch' provisional liquidation?

In a 'light-touch' provisional liquidation, the provisional liquidators are appointed with limited powers, enabling them to work alongside the existing board of directors without completely displacing the directors' powers. Is foreign recognition of the provisional liquidation available?

Yes. The provisional liquidation proceedings can be readily recognised in other jurisdictions to allow a global restructuring to be effected. Typically, the appointment of provisional liquidators to a Bermuda company will be followed immediately by an application for recognition in the jurisdiction of the company's operation and/or listing. Cost and speed

Provisional liquidators can be appointed on an expedited basis - depending on the particular facts, appointments can often be secured on less than 24 hours' notice. Costs are dependent on the complexity and length of the subsequent proceedings. Costs will include the fees and expenses of the provisional liquidators, which are typically paid out of the assets of the company. Introduction

A court-supervised scheme of arrangement is the most...