Cable & Wireless Worldwide Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice David Richards |
| Judgment Date | 26 July 2012 |
| Neutral Citation | [2012] EWHC 3687 (Ch) |
| Docket Number | Case No: 3945 of 2012 |
| Court | Chancery Division |
| Date | 26 July 2012 |
[2012] EWHC 3687 (ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
7 Rolls Building
Fetter Lane
London
EC4A 1NL
Mr Justice David Richards
Case No: 3945 of 2012
Mr Stephen Horan (Instructed by Messrs Herbert Smith LLP) appeared on behalf of the Applicant
As Approved
Thursday, 26 July 2012
This is an application to sanction a scheme of arrangement and to confirm a reduction of capital involved in it. The purpose of the scheme, which is proposed between Cable & Wireless Worldwide Plc ("the Company") and its members, is to effect the takeover of the Company by a wholly owned subsidiary of Vodafone Group Plc.
The price to be paid by the subsidiary, Vodafone Europe BV, is 38 pence per share which is a price which the directors of the Company, who have been advised by Barclays and Rothschilds, consider to be fair and reasonable. There was competitive interest in the acquisition of the Company but ultimately one of the competitors withdrew and no other competitor has entered the field.
A significant shareholder, holding some 19 per cent of the share capital of the Company, was, while not committing itself to opposing the scheme, withholding its consent until the day before the meeting of members convened to consider the scheme. At that point, it indicated that it would vote in favour of the scheme.
The result is that the scheme has been approved by large majorities, comfortably exceeding the statutory requirements. Just under 20,000 shareholders holding a little over 2.15 billion shares voted in favour of the scheme while 2,844 members holding a little over 18.5 million shares voted against the scheme.
The procedural requirements of the Companies Act 2006 in relation to both the scheme of arrangement and the reduction of capital have been complied with and, in terms of the commercial merits of the scheme, there is no reason why the court should not conclude that this is a scheme which should be sanctioned. The acquisition of the company's share capital is, as I have mentioned, to be effected by means of a reduction of the company's share capital. This is achieved by cancelling all the issued shares of the company except one, and then applying the reserve arising in the books of the company as a result of that cancellation in paying up an equal number of shares to be issued to Vodafone Europe BV or its nominees.
The reduction of capital raises no separate issues and again the procedural requirements have been complied with. It is therefore a reduction of capital that is entirely appropriate for confirmation by the court.
The one share not being cancelled was issued a short while ago to Vodafone Europe BV at a price of 38 pence, thereby representing a premium of 33 pence over the nominal value of 5 pence. This step was taken in order to avoid the requirement which would otherwise arise under the Companies Act for a valuation of the consideration to be provided for the issue of the new shares.
There is only one point arising which calls for any further consideration. It arises on the contents of the statement of capital which, under section 649 of the Companies Act 2006, must be approved by the court for the purposes of the reduction of capital and filed by the company with the Registrar of Companies, together with a copy of the order of the court confirming the reduction of capital. I am told by Mr Horan, who appears as counsel for the company, that this is a point which commonly arises and has given rise to difficulty. I can certainly say that I have come across it in at least one previous case.
Section 649(2) provides:
"The statement of capital must state with respect to the company's share capital as altered by the order -
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares -
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium)."
The requirement for a statement of capital replaced the requirement contained in previous Companies Acts for what was called a minute, which required rather less information than is now required to be stated in the Statement of Capital. There are a number of other provisions in the Companies Act 2006 which require statements of capital to be filed in other circumstances, but in terms which are either the same as or similar to those contained in section 649(2).
The Statement of Capital is concerned with the issued share capital of the company rather than its authorised share capital. The point of difficulty arises under paragraph (d) and relates to the treatment of the company's share premium account. A company issues a share at a premium where the value of the consideration received by the company, whether in cash or otherwise, for the share exceeds the nominal or par value of the share. Section 610 of the Companies Act 2006 requires the company to carry the amount or value of such premiums to a separate account in its accounting records called the share premium account, which, subject only to its use as permitted by subsections 2 and 3 of section 610, is treated as paid up share capital for the purposes of the statutory provisions relating to a reduction of share capital. It cannot, therefore, be treated as realised or unrealised profits and, for example, distributed to members by way of dividend. It is, to all intents and purposes, part of the capital of the company. There are special provisions qualifying section 610 for mergers and certain intra-group transactions.
The total sum standing to the credit of a share premium account may derive from many separate issues of shares. In the present case, the company has, as a result of issues of shares over the years, accumulated a share premium account amounting to over £911 million. This is not altered by the present scheme or reduction of capital.
The issued share capital of the company in this case, as altered by the order confirming the reduction of capital, is one share with a nominal value of 5 pence which was issued at a premium of 33 pence. This is the share to which I earlier referred, which was issued to Vodafone Europe BV. Applying the terms of section 649(2) would not seem to present any difficulty. Paragraph (d) requires there to be stated the amount paid up and the amount, if any, unpaid on each issued share, whether on account of the nominal value of the share or by way of premium. The amount paid up on the one issued share, whether on account of its nominal value or by way of premium, was 38 pence. Likewise, no difficulty appears to arise from the prescribed form for these purposes which is Form SH19. It requires there to be stated, so far as relevant, the "amount paid up on each share including both the nominal value and any share premium".
Notwithstanding this apparently straightforward reading of the section and the prescribed form, there is a view that the amount shown as paid up, in this case on the single issued share, should be not only the amount paid up on that share, but should include also the entire amount standing to the credit of the company's share premium account. On this basis, the statement...
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