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In the Matter of SABMiller PLC (2016)

Summary

In relation to the summoning of members to a shareholders' meeting to consider a scheme of arrangement, the Companies Act 2006 s.895 and s.896 had to be interpreted flexibly and consistently with the legislative intention to promote compromise. There was no injustice to a member waiving the right to participate in the scheme meeting where it had already given an irrevocable undertaking to be bound by the proposed scheme; nor was there any injustice to other members in such a waiver, since they had no right to force a consenting member to attend and vote. 

Facts

A company (C1) applied for an order under the Companies Act 2006 s.896 summoning a single meeting of all the ordinary shareholders in the company, excluding the two largest shareholders, to consider a scheme of arrangement.

The object of the scheme was to enable a new company (C2) to acquire C1's entire issued share capital. The scheme was the first stage in a complex process intended to lead to a Belgian company (C3) acquiring control of C1. The second stage in that process was a voluntary cash takeover offer by C3 for all the initial C2 shares, in return for which C1's shareholders would receive either cash consideration or a partial share alternative. In the event that they opted for the partial share alternative, the retained portion of their initial C2 shares would be reclassified into restricted shares. At the third stage, C2 would become the new holding company of the combined group. The transaction was unanimously recommended by C1's directors. C1's majority shareholders entered into irrevocable undertakings to support the scheme and to elect for the partial share alternative. C1 expressed the view that the majority shareholders should not vote in the same class as the other shareholders. The minority shareholders claimed that the court lacked jurisdiction to order that the majority should be treated as a separate class and was not entitled to convene a meeting of the shareholders from which the majority shareholders were excluded.


The minority shareholders contended that, pursuant to s.895 and s.896 of the 2006 Act, the rights of the persons to be bound by the scheme were not sufficiently dissimilar that they could not consult together with a view to their common interest.

Held

(1) The situation most frequently encountered in a scheme case was one where a dissentient minority objected to its own inclusion in a class with other members having allegedly different rights, Sea Assets Ltd v Perusahaan Perseroan (Persero) PT Perusahaan Penerbangan Garuda Indonesia [2001] EWCA Civ 1696 considered. In the instant case, however, the minority shareholders were supportive of the proposed scheme and objected merely to the decision that the largest shareholders should not be summoned to the meeting but should simply give undertakings to the court to be bound by the scheme. Any decision of the court on a class question was highly fact specific and ultimately a matter of judgment. In the instant case, even if the rights of the majority shareholders under the scheme were not sufficiently dissimilar to require them to be placed in a separate class, the scheme proponents might be concerned about the risk that the majority was unrepresentative of the class of ordinary shareholders and had voted with a special interest in view, namely to secure the benefits of a partial share allocation that had been structured with themselves primarily in mind, Hawk Insurance Co Ltd, Re [2001] EWCA Civ 241, [2002] B.C.C. 300 followed, UDL Argos Engineering, Re applied (see paras 24, 27, 30-31, 35-36, 38, 40-41, 43 of judgment).

(2) There was nothing in the statutory wording to suggest that a member could not voluntarily agree to waive the right to participate in a meeting. That approach was entirely consistent with the background and purposes of the scheme jurisdiction, which was to facilitate compromises or arrangements by supplying a statutory alternative to an agreement between the company and its relevant members in a case where it was not possible to obtain the unanimous consent of such members. Where a member was willing to give consent by agreeing to enter into an undertaking to be bound by the scheme, there was no injustice to that member if he was not summoned to a scheme meeting. Nor was there any injustice to other members if the consenting member simply agreed not to be included in the meeting, since those other members had no right to force him to attend and vote. Therefore, s.895 and s.896 had to be interpreted flexibly and purposively in accordance with the legislative intention to promote compromises and permit the court, where appropriate, to accept undertakings from members to be bound by the scheme (paras 47-50).

(3) It was a mischaracterisation for the minority to object that C1 was effectively excluding certain shareholders from the scheme meeting, since the crucial factor was not the decision of C1 per se, but the provision by the majority shareholders of their consent to be bound by the proposed arrangement whilst agreeing to forego their rights to participate in the process of compulsion by which they might form part of the majority that bound the dissentient or absent minority. Accordingly, the court had jurisdiction to order a meeting of shareholders which did not include the majority (paras 52-53).

Application granted

Chancery Division
Snowden J
Judgment date
23 August 2016
References
LTL 30/8/2016