9 - Schemes of Arrangement

Question 1

Who is the scheme of arrangement effected between?

Answer 1

• Company and shareholders

- Or the company and liquidators

Question 2

How many shareholders meetings need to be held?

Answer 2

• 2
• Court meeting - to approve the scheme under s899(1)
• Partnership assurance GM immediately afterwards to approve the other company business relating to the implementation of the scheme.

Question 3

Which shareholders are prohibited from voting in a scheme of arrangement?

Answer 3

• Shareholders for shares that were acquired prior to the SCHEME RECORD TIME
• These are not regarded as scheme shares
• Re Hellenic

Question 4

What is the principle from Re Hellenic regarding shareholders not being able to vote in certain situations?

Answer 4

• Bidder should not exercise votes in relation to any shares that it holds in the target company
• At a court meeting that is convened to approve a scheme of arrangement

Question 5

Why is it important to determine the classes of shareholders in the context of a scheme of arrangement?

Answer 5

• Court must be satisfied that the correct classes of shareholders have been constituted
• If there is a separate class = need a separate court meeting for that class, in order to approve the scheme.
• Each court meeting must be in favour of the scheme independently, i.e. a majority in number of shareholders in that class and 75% value in each class.

Question 6

What happens if the court decides that a separate class should have been constituted?

Answer 6

• Will refuse to sanction the scheme
• Therefore the issue of class is an important question for the target company to determine at the outset of the scheme process, usually in consultation with counsel
• To make sure that proper Court Meetings are constituted
• Court does not provide advance guidance on this issue

Question 7

Who should be included in the same class and what is the case authority for this?

Answer 7

• Bowen LJ in Sovereign Life Assurance v Dodd
• Class has to include persons who’s rights are not so dissimilar as to prevent them consulting together with a view to their common interest.

Question 8

Do different classes of shares automatically mean that there is a separate class for s899?

Answer 8

• No

- Target company will often instruct Counsel for an opinion as to whether separate class should be identified.