Where there has been no decision to wind up a company and there is still a reasonable prospect of survival the courts have the power to appoint an examiner. The role of the examiner is to formulate proposals for a compromise or a scheme of arrangement in respect of the company, its creditors, and members and to report to the court on the viability of the company. These proposals are put to the shareholders and to the different classes of creditor and are deemed to be accepted by the creditors if passed by a majority of those, whose interests would be impaired by the proposals.
Once the examiners’ proposals have been voted upon by the members and creditors, he or she must again report to the court on the outcome of those meetings. If the proposals are rejected the court will usually bring the examinership to a conclusion and a receiver or a liquidator may be appointed. If the proposals are accepted, a hearing date is set for the court to consider the proposals and any creditor whose interest is affected may appear and be heard.
If the court decides to confirm the proposals, it fixes a date for implementation which shall not be later than 21 days. The date of the implementation of the proposal will be the date on which the company comes out of court protection and the role of the examiner ceases. The proposals for a compromise or scheme of arrangement then become binding on the company, its members, and creditors, including members or creditors who may have not approved of the proposals.
If the proposals are not confirmed by the court, then it can make such order as it deems fit which in most cases is likely to be an order for the winding-up of the company.