Nordic Aviation – What is a Scheme of Arrangement?

A tumultuous summer

In July this year, Nordic Aviation Capital (“NAC”) sought and was granted at the Irish High Court, a scheme of arrangement under the Companies Act 2014. The scheme’s result saw, amongst other things, a 12-month standstill and deferral of approximately US$5bn of both NAC’s secured and unsecured debt.

This was a first in the Irish aircraft lessor market. 

Until early 2020 market conditions had provided aviation leasing entities with favourable returns over consecutive years. However, the onset of Covid-19 and, more importantly, the action taken by governments across the world seeking to contain its spread has left airlines grounded and aircraft leasing companies in an increasingly precarious financial position. Consequently, NAC sought respite from its creditors via a scheme of arrangement.

So, what exactly is a scheme of arrangement and why did NAC decide on this route to dig themselves out of trouble as opposed to an examinership process for example?

Scheme of Arrangement

  • What is it?

In short, a scheme of arrangement is set down in the Companies Act 2014 as an arrangement between the company in question, so NAC in this instance, and either:

  • its creditors or any class of them; or
  • its members or any class of them.

Though it is a relatively old concept, its revamp under the Companies Act 2014 has now made it a much more cost effective, simpler and more flexible tool for companies to utilise.


In order for the proposed scheme of arrangement to take effect, the following steps must be taken:

  1. It must be approved by 75% or more of the creditors or members at the required meetings of classes of creditors or members;
  2. Notice of the arrangement and its approval publicised in 2 national newspapers; and
  3. Application made to the High Court to approve the arrangement.

Advantages – particularly vs examinerships

As seen above, a scheme of arrangement is a relatively straight forward process when compared to an examinership process. The main advantages are:

  1. No loss of control of the business;
  2. Vastly reduced costs for example, there’s no need for the appointment of an examiner, independent accountant reports or petition costs, all of which can be in excess of €100,000;
  3. No burden of proof to show the viability of the business as in an examinership;
  4. No statutory deadlines as in an examinership process, even accounting for the recently increased time permitted to examinerships under the Companies (Miscellaneous Provisions (Covid-19) Act 2020; and
  5. Far less publicity vis a vis an examinership as it is only required to become public if successfully approved.

The Future

As can be seen therefore, the relative ease and cost effectiveness of a scheme of arrangement process could well become the de facto procedure for companies during the current Covid crisis. NAC may have been the first in the Irish aircraft lessor space but may well not be the last.