A Matter Of Class: Determining Creditor Classes In A Scheme Of Arrangement

When a scheme of arrangement involving compromise or arrangement is proposed between a company and its creditors under Section 86 of the Companies Law, the Court will consider whether it is appropriate to convene one or more meetings of creditors (the "Court Meetings") for the purpose of voting on the compromise (the "Class Issue"). The Court must ensure that the rights of creditors attending each Court Meeting are not so dissimilar as to make it impossible for them to consult together with a view to their common interest. Given the variety and complexity of ways in which creditors and companies may structure their affairs, this task is not one which is always straightforward.

If at the Court Meetings the creditors vote to approve the scheme, the Court must then consider whether it is appropriate to sanction the scheme (the "Sanction Issue"). The judgment in Re Ocean Rig UDW Inc (in provisional liquidation) concerned a US$3.7 billion restructuring of debt, which is