Scheme of Arrangement – Mandatory Corporate Action with Options

A scheme of arrangement / reconstruction is a court-approved agreement between a company and its shareholders or creditors/ It may effect mergers and amalgamations and may alter shareholder or creditor rights. Schemes of arrangement are used to execute arbitrary changes in the structure of a business and thus are used when a reorganisation cannot be achieved by other means. They may be used for rescheduling debt, for takeovers, and for returns of capital, among other purposes.

Often schemes of arrangement are called complex issues with multiple components, as the entitlements and options available to shareholders can be complex. In some schemes a company may offer a large range of options in exchange for existing shares in the same company, spin offs into new companies, such as new equity, zero dividend preference shares, redeemable B shares, cash, loan notes. If loan notes or redeemable B shares are offered, then this will lead to further corporate actions, such as conversion and redemption opportunities at later dates.

As with any corporate action, whatever choice you make should not affect the value of the holding as at the effective date of the event.

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