Re Waste Recycling Group Plc
| Jurisdiction | England & Wales |
| Judge | Mr. JUSTICE LLOYD |
| Judgment Date | 28 July 2003 |
| Neutral Citation | [2003] EWHC 2065 (Ch) |
| Court | Chancery Division |
| Date | 28 July 2003 |
[2003] EWHC 2065 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London. WC2A 2LL
Mr. Justice Lloyd
MR. MALCOLM DAVIS-WHITE, Q.C. appeared on behalf of the Company. MR. J. PAGE, a shareholder, appeared In Person.
APPROVED JUDGMENT
This is the hearing of a petition to sanction a scheme of arrangement under Section 425 of the Companies Act and to confirm the reduction of the capital of the company provided for by the scheme. The company is called Waste Recycling Group plc, and the point of the scheme is to carry through a recommended take-over of the company by another company called Cholet Acquisitions Ltd. (which I will call 'the acquirer').
The terms of the acquisition are that existing shareholders should receive a cash payment of the acquirer of 267.5 pence per share. That figure represents a premium of a significant amount to the middle buying price as it was on the last business day before an announcement in January by the company that it was in talks about a possible take-over.
The scheme is of a nature that is reasonably familiar whereby the scheme shares, which are in practice all the shares of the company, are cancelled. The share capital is then increased to its former amount. The number of shares cancelled are re-issued to the acquirer or its nominees, and issued fully paid by crediting the share provision account set free by the earlier cancellation, and in consideration of the cancellation of the issue of the shares to the acquirer, the acquirer makes the cash payment to the, by then, former shareholders of the company.
The scheme has two elements: the sanction of the scheme and the confirming of the reduction of the capital. In terms of the sanction of the scheme the Court requires to be satisfied that the statutory provisions have been complied with and to be satisfied that the class has been fairly represented, and that the majority shareholders were acting bona fide and not coercing the minority for the sake of interests adverse to those of the class whom they purport to represent. In terms of merits, the test is put in terms redolent of the Victorian age, taken from a well-known nineteenth century Judgment, that the scheme is one that an intelligent and honest man, a member of the class concerned and acting in respect of his interest, might reasonably approve.
The scheme is one in relation to which only one class of members was identified, and I am satisfied that that is correct. The determination of the class of members, as indeed in a different type of scheme of a class of creditors, depends primarily on considering first of all the rights of the members in question; and, secondly, the way in which the scheme proposes to deal with those members. It is possible that you have five members with all essentially the same rights, but who are to be dealt with by the scheme in different ways, in which case there will be different classes according to how they are to be dealt with.
In the present case there is really only one class of members in terms of rights, and all members are to be treated the same under the scheme by having their shares cancelled in return for the cash payment. So, I am satisfied that there is only one class. I am satisfied that the steps taken as directed by the Companies Court in respect of convening the meeting were properly carried through, and accordingly in terms of the compliance with the basic procedure, all has been done as it should have been.
Passing on, before I come to the matters of, as it were, the merits, but referring briefly to the question of the reduction of capital, it is necessary that the company shall have power in its Articles to reduce capital; it is necessary for the relevant special resolution to have been passed; it is necessary in the present case, and it is the case, that by Court order, the procedure as to an inquiry as to creditors has been dispensed with. The discretion to confirm a reduction of capital turns on whether the shareholders are being treated equitably; whether the cause of the reduction has been properly explained to shareholders; and whether the reduction is for a discernible purpose. As I say, all the shareholders have been treated the same. There is therefore no issue as to whether they are being treated equitably. The cause of the reduction has been properly explained to shareholders, and the reduction is for a discernible purpose.
The Court meeting was duly convened and that was immediately followed by a meeting at which the resolution requiring the reduction of capital was proposed. The resolution in favour of the scheme was approved by a substantial majority. I am told that approximately 74 percent of all the issue shares of the company were voted and the proportion of shareholders who actually voted was relatively small, but they include the principal shareholder which holds 45.5 percent of the shares. In terms of the figures on the vote, 555 shareholders voted in favour and 143 against. But, in terms of value, the shares which were voted in favour were 99.7 percent of all the shares voted. So, there is an overwhelming vote in terms of value in favour of the scheme, and the votes against were principally from the smaller shareholders.
The hearing has been attended not only by Mr. Davis White for the company, and those instructing him, but by Mr. James Page, who objects to the scheme. He is a shareholder, holding a small number of shares in the company, and he has written a letter to the Court and has expanded a little on what he says in that letter in submissions to me this morning. His concern is at the prospect that this company, which has acted, as its name might suggest, in the business...
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