Definition
A scheme of arrangement is a court-approved corporate procedure used in the UK and many Commonwealth jurisdictions (Australia, Hong Kong, Singapore, etc.) as an alternative to a tender offer for friendly acquisitions. The target proposes the scheme; if approved by the requisite shareholder majorities and sanctioned by the court, the scheme binds all shareholders.
Approval requirements (typical UK pattern)
- Majority by number of shareholders voting (50%+1)
- 75% by value of shares voted
- Court sanction at a sanction hearing
Why it matters
Schemes are used in friendly deals because they:
- Typically have lower acceptance thresholds than tender offers
- Are binding on all shareholders once approved (no straggler problem)
- Are simpler than running a takeover bid plus compulsory acquisition
Distinction
A takeover bid (tender offer) requires individual shareholder action; a scheme is a single corporate procedure that binds everyone.