TSB Nuclear Energy Investment UK Ltd v Toshiba Nuclear Energy Holdings (UK) Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henderson |
| Judgment Date | 19 February 2014 |
| Neutral Citation | [2014] EWHC 1272 (Ch) |
| Docket Number | Case No: 8597/2013; 111/2014 |
| Court | Chancery Division |
| Date | 19 February 2014 |
[2014] EWHC 1272 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Henderson
Case No: 8597/2013; 111/2014
Mr Andrew Thornton (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) appeared on behalf of the Applicants
Approved Judgment
I have before me two applications of a slightly unusual nature. The first is an application by a company called TSB Nuclear Energy Investment UK Limited ("Investment") asking the court to sanction a proposed scheme of arrangement between itself and its sole shareholder, Toshiba Corporation ("Toshiba"), the well-known Japanese company. The second application is by a different company, Toshiba Nuclear Energy Holdings (UK) Limited ("Holdings"), involving the cancellation of all of its shares and the reduction of its capital. Accordingly the two applications are linked. It is proposed that the reduction will take effect immediately prior to the scheme, and the purpose of the combined operation is to bring about a merger between Holdings and Investment, with Holdings remaining as the surviving company holding all of the assets and liabilities currently held by the two of them. The way in which it is proposed to achieve this is by taking advantage of the little-used section 900 of the Companies Act 2006. When that objective has been achieved, a further order is sought dissolving Investment under the jurisdiction conferred by section 900(2)(d).
The background to the applications is briefly as follows. Toshiba, Investment and Holdings all form part of the same group of companies which carries on a broad multinational business. The entire issued capital of Investment is held by Toshiba, and under the terms of the scheme it is proposed that the business, assets and liabilities of Investment will be transferred to Holdings, in return for which Toshiba will receive 938 newly allotted shares in Holdings. I should have explained that Holdings is itself a subsidiary of Investment, but not a wholly-owned one. Investment holds 67 per cent, or 938, of the 1400 issued shares in Investment. Another 20 per cent, amounting to 280 shares, are held directly by Toshiba. The remaining 13 per cent consist of C and D shares of £1 each. Each of those classes of shares is held by another group company which has given its written consent to the proposals.
Under the terms of the reduction, as I have said, the shareholding of Investment in Holdings will be cancelled, and the reserve arising on the reduction will be applied in paying up the new shares to be issued to Toshiba. The reason for proceeding in this way is to avoid any problem which might otherwise be caused by Investment acquiring its own shares when the scheme takes effect. The overall purpose of the scheme is said to be to streamline the structure of the group with a view to achieving savings of costs. The end result will be that Toshiba becomes the direct owner of 87 per cent of the shares in Holdings, whereas at present it holds 20 per cent of the shares in Holdings directly and 67 per cent indirectly through Investment.
There are also important fiscal considerations which have led the group to decide to proceed if it properly can in this way. They are explained in paragraph 8 of the witness statement of Mr Kiyoshi Okamura in support of the application for approval of the scheme. He explains that under Japanese law the scheme will be treated as tax-neutral, with the result that no capital gains tax liability will arise in Japan. If it were not possible to proceed by way of the scheme, however, a very substantial liability would arise reflecting the fact that Investment indirectly owns assets with, I am told, a balance sheet value of just under £500,000,000.
Mr Okamura also says that if reconstruction relief is not available by way of the scheme, the proposal would not be undertaken in any different shape or form. There is the added (although, I am told, in the present case subsidiary) advantage that no stamp duty will be payable in the United Kingdom if the matter is dealt with by a scheme approved by the court.
Mr Thornton, counsel for the applicants, informed me, on instructions, that the only assets now held by Investment consist of its shares in Holdings and a small amount of cash at the bank of the order of £3,500. Investment also has no liabilities. It can be seen, therefore, that the transfer of assets will in practice be a very simple one, because by the time the scheme takes effect the shares in Holdings will have been cancelled and there will be nothing left to transfer apart from the cash at the bank; there will also be no liabilities to be taken over.
A meeting of the sole shareholder in Investment has been convened, in the usual way, and to the surprise of nobody Toshiba agreed at that meeting that the scheme should go ahead. The formal requirements of Part 26 of the Companies Act 2006 are therefore complied with.
A point which I should deal with at this stage is whether there can be a valid court meeting for the purposes of Part 26 where there is only one member of the relevant class of shareholders. That point has been considered in a number of earlier cases, and it is now well established that where there is only a single member of the relevant class there can still be a valid meeting within the meaning of the relevant legislation, even though as a matter of normal usage, and in other statutory contexts, a meeting normally connotes that there are at least two people who are in a position to communicate with each other. This point was established by the judgement of Morritt J (as he then was) in Re RMCA Reinsurance Ltd [1994] BCC 378. In a more recent case, Re Altitude Scaffolding Ltd [2006] EWHC 1401 (Ch), [2007] 1 BCLC 199, David Richards J affirmed that proposition, while drawing a distinction with cases where there is more than one member of the relevant class but only one of them in fact attends the meeting. In those circumstances, he held, there is not a meeting within the normal meaning of the statutory provisions, the distinction being that there is at least a possibility of two or more members meeting together. That possibility does not, of course, arise where there is only a single member of the class. Indeed, as the judge pointed out, a meeting can in fact be dispensed with in those circumstances, because it is well established that a...
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