2.9.2 An arrangement with creditors
An arrangement with creditors, also called a scheme of arrangement, is a legally binding arrangement made by a society with its members and creditors to address its insolvency. The process begins with a court order calling meetings of creditors and members to approve proposals to address the insolvency. Options include reducing the liabilities and/or increasing the assets of the society, or by amalgamation, merger or transfer to another solvent legal entity. Each class of creditor (secured, unsecured, etc) and member has to approve the proposals by a three-quarters majority vote in favour, with members voting on a one-person-one-vote basis, and creditors voting by value of the credit they represent. When the three-quarters support of all the classes of creditor and member has been secured, the scheme arrangement is submitted to the court to sanction. The court will check that the FCA is satisfied that the arrangement does not contravene the Co-operative and Community Benefit Societies Act 2014, before it sanctions the scheme and issues a court order that makes the scheme legally binding on all creditors and members. The scheme must also be registered with the FCA.
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