Halcrow Holdings Ltd, Re V

The court has an unfettered discretion whether to sanction a scheme of arrangement. It must consider statutory compliance, fair representation and bona fide voting, whether an intelligent and honest member might reasonably approve the scheme, and whether there is any blot on it. Relevant third-party or pension concerns may be considered, but speculative cultural or commercial risks are insufficient without evidence of unlawfulness, inappropriateness or likely financial detriment. An accidental failure to give notice may be disregarded where there was a genuine attempt to notify all entitled persons. A capital reduction requires proper provision for creditors and a discernible purpose.

Halcrow Holdings Limited applied for sanction of a scheme of arrangement under sections 895–899 of the Companies Act 2006, enabling CH2M Hill Europe Limited to acquire its issued share capital. The Company also sought confirmation of a reduction of capital and an amendment addressing the absence of USCo share certificates.

The issues were whether the accidental omission to send scheme documents to approximately 306 shareholders could be waived, whether the scheme should be refused because of concerns about the Halcrow Pension Scheme, whether the capital reduction met the statutory requirements, and whether the technical amendment could be made.

1. Accidental omission. The failure to send documents to the omitted shareholders resulted from an execution error, not a deliberate decision not to serve them. It was therefore an accidental failure within section 313 of the Companies Act 2006 and the equivalent article in the Company’s articles. The omission could properly be waived because the affected shareholders were subsequently informed in time to object or vote, and the scheme received overwhelming support by value.
2. Sanction of the scheme. The court’s discretion is not a rubber stamp. The relevant considerations were statutory compliance, fair representation and bona fide voting, whether an intelligent and honest member of the class might reasonably approve the scheme, and whether there was a blot on it. The court could consider the effect on the pension scheme and concerns of persons who were not scheme members.
3. The absence of legally binding commitments from the proposed new parent was a legitimate concern, but there was no evidence that the transaction would weaken the employer covenant, breach the Company’s obligations, or reflect an intention to damage the pension scheme. The pensioners’ concerns about a possible change in commercial culture were speculative and did not establish a blot or justify refusal of sanction. The scheme was accordingly sanctioned.
4. Reduction of capital. The reduction had been approved by the members, proper provision had been made for creditors, and the takeover supplied a discernible purpose which was a real prospect. The pension scheme could not show a real likelihood that the reduction would prevent the Company from discharging its liabilities when due.
5. Technical amendment. The court made the amendment under its inherent jurisdiction because replacing a USCo share certificate with a confirming letter did not alter the substance of the agreed scheme.