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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Scheme of arrangement

What is a creditor scheme of arrangement, and how can it bind lenders who vote no?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A scheme of arrangement is a court-supervised compromise between a company and its creditors, or a class of them, that binds every creditor in each class once the required majority approves it and the court sanctions it. In the UK and Australia that majority is a majority in number holding 75% in value of those voting in each class; New Zealand has a court-approved equivalent under Part 15 of its Companies Act. Lenders use schemes to change terms the loan documents say need every lender's consent, such as maturity or amount, and the hardest arguments are usually about the classes.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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