Schemes of arrangement under Maltese law : room for improvement?

Abstract

Schemes of arrangement are mechanisms which are found in the Companies Act whereby a compromise or arrangement is agreed to between the company and its members or creditors. In the United Kingdom, schemes are very popular restructuring tools utilised to undertake multiple transactions. Whilst the provisions on schemes of arrangement in the Maltese Companies Act are almost identical in nature and scope to the provisions found in the UK Companies Act, one fundamental difference is present; under Maltese law such mechanism may only be availed of by insolvent companies. On the contrary, in the United Kingdom, solvent companies are entitled to employ schemes of arrangement for a wide variety of purposes, one of the most predominant purpose being as an alternative to a traditional takeover offer. In fact, schemes of arrangement have today become the mechanism of choice for effecting a takeover in the United Kingdom. The Maltese provisions on schemes of arrangement may therefore be improved by extending the application of schemes of arrangement to solvent companies, enabling such companies to benefit from the advantages which exist within the legal framework of the United Kingdom.