For corporate groups considering an internal reorganisation, a restructure effected via section 413 of the Corporations Act 2001 (Cth) (Corporations Act) under a scheme of arrangement (Corporate Restructure Scheme) provides a flexible alternative to more orthodox approaches commonly adopted.
As is well known, the Corporations Act enables a corporation to enter into a scheme of arrangement with its creditors or members (or any class of them). Schemes of arrangement are commonly used to implement agreed mergers, as an alternative to the comparatively rigid mechanism of a takeover bid.
However, it is less well known that schemes of arrangement can also be used to implement reconstructions. Under a Corporate Restructure Scheme, it is possible to transfer some or all of the assets and liabilities of the scheme company to another company, followed (where all, rather than some, of the assets and liabilities of the scheme company are transferred) by deregistration of the scheme company.
In recent years, several Australian companies, such as Telstra, Chevron, Lion Nathan, JP Morgan, and Barrick Gold, have successfully implemented Corporate Restructure Schemes.
This guide outlines the effect of a Corporate Restructure Scheme, examines the process involved and looks at some of the advantages of proceeding this way. A Corporate Restructure Scheme may also be used for arms’ length restructures, as well as amalgamations, but this note will focus on their use in internal restructures.
