Re Liberty International Plc

For a court-sanctioned reduction of capital, a creditor may object only if the debt or claim would be admissible in proof at the relevant date and there is a real likelihood that the reduction would cause the company to be unable to pay it when due. Claims dependent on an unexercised regulatory discretion are not admissible in proof. The statutory phrase should not be glossed, although evidence should be assessed by reference to present facts, a sensible temporal horizon and a chance beyond the merely possible but short of the probable. A merger reserve is not attributed as paid-up share premium in a statement of capital.

Liberty International plc sought court confirmation of a reduction of its share premium account to facilitate a demerger of its property investment and development business into Capital & Counties Properties plc.

The court considered creditor protection, including whether theoretical pension-related liabilities created claims entitled to object and whether the evidence established a real likelihood of inability to pay. It also had to approve Capco’s statement of capital and decide whether part of a merger reserve had to be attributed as paid-up share premium on each new share.

The court confirmed Liberty’s reduction of capital and approved Capco’s statement of capital.

1. Under sections 646(1) and 648(2) of the Companies Act 2006, an objecting creditor must show both that the debt or claim would be admissible in proof at the relevant date and that there is a real likelihood that the reduction itself would cause the company to be unable to discharge the debt when due.
2. Claims dependent on the future exercise of a prior statutory discretion are not admissible in proof while that discretion remains unexercised. Liberty’s possible exposure to contribution notices or a financial support direction under the Pensions Act 2004 therefore did not create objection claims.
3. The words “real likelihood” should not be supplemented by an additional gloss. The assessment should be grounded in present facts, directed to a sensible predictive period, and concerned with a chance beyond the merely possible but short of the probable. These were descriptive features of the assessment, not a prescriptive test for other courts.
4. The evidence, including the working-capital model and available resources, supported the conclusion that no creditor could satisfy the statutory test. The Registrar’s dispensing with a creditor list was properly drawn to the judge’s attention before sanction.
5. For Capco’s statement of capital, section 649(2)(d) concerned attribution of a share premium account within section 610. The merger reserve arising under section 612 was an unrealised profit to which the principle in Drown v British Picture Corporation Ltd applied. It did not have to be attributed to individual shares.

First-instance decision. No prior or appellate decision is stated in the judgment.