Re Uniq plc

The court sanctioned a scheme of arrangement under section 899 of the Companies Act 2006 as part of a wider restructuring intended to address a substantial deficit in Uniq's defined benefit pension scheme. The sanction rested on findings that the scheme, when viewed as an integral part of the restructuring, conferred a substantial benefit on members by preserving a viable trading company and protecting PPF entitlements; that the statutory requirements for convening and voting at the members' meeting had been satisfied; and that defects identified (a clerical error in the special resolution and issues relating to potential financial assistance) could legitimately be remedied or authorised by the court.

The court concluded that payments and loans routed through group companies to enable Newco to subscribe for shares did not unlawfully amount to impermissible financial assistance because their principal purpose was to secure the release of pension liabilities and they were made in good faith in the interests of the relevant companies (engaging the exception in section 678(2)). Indemnities and costs connected with Newco were approved pursuant to the court's sanctioning power under section 681(2)(e). The court exercised its discretionary power to sanction the scheme, applying the established Buckley formulation for assessing whether a scheme should be confirmed.

Background and parties: Uniq plc (formerly Unigate plc) had a large defined benefit pension scheme with a significant funding deficit after disposals and adverse valuation movements. The petition sought court sanction of a scheme of arrangement under s.899 Companies Act 2006 as part of a complex restructuring involving a newly incorporated company (Newco), the trustee of the pension scheme, and the Pension Protection Fund (PPF).

Nature of the application: The petitioner applied for sanction of the scheme required to implement a restructuring whereby existing shareholders would be diluted (to 9.8% of equity) and Newco would acquire 90.2% of the enlarged issued share capital, with proceeds applied to address pension scheme liabilities and to secure releases for Uniq and certain subsidiaries. The restructuring included a regulated apportionment arrangement and the intended triggering of an insolvency event for Newco to permit PPF processes.

Issues for determination:

• whether the scheme, taken alone or as part of the restructuring, provided sufficient benefit to members to avoid the difficulty identified in Re NFU (where members give up all rights and receive no benefit);
• whether the members' meeting fairly represented the class given the relatively low turnout by number;
• whether steps in the restructuring constituted unlawful financial assistance contrary to s.678 Companies Act 2006; and
• whether an arithmetical error in the text of the special resolution could be treated as a correctable drafting mistake.

Court's reasoning: The court treated the scheme as an integral part of the wider restructuring and held that the restructuring conferred substantial benefit on members by preserving a viable company and maintaining PPF protection. The turnout, though low by number, was not objectionable given the very large number of small holdings and the turnout by value. The typographical error in the special resolution was capable of correction by construction in light of the circular and the minutes (applying Re Willaire Systems plc). On financial assistance, the court analysed the payments under s.677 categories and concluded that (i) many payments were genuine repayments or loans not falling within the prohibition, (ii) the principal purpose of the relevant loans and payments was to secure releases of substantial pension liabilities and therefore they fell within the good-faith/incidental exception in s.678(2), and (iii) indemnities and costs could be authorised under the court's unqualified power in s.681(2)(e). Finally, applying the established discretionary test (Buckley formulation), the court was satisfied the scheme was one an intelligent and honest member might reasonably approve and that the statutory conditions had been satisfied.

Relief granted: The court sanctioned the scheme and confirmed the reduction of capital provided for by it.

This is a first-instance sanctioning: the court sanctioned the scheme of arrangement under section 899 Companies Act 2006 and confirmed the reduction of capital. The sanction was granted because the scheme, read as part of the integral restructuring, provided substantial benefit to members and creditors, the statutory convening and voting requirements were satisfied, the turnout was not objectionable in the circumstances, the drafting error in the special resolution was properly correctable by construction, and the payments and indemnities either did not constitute unlawful financial assistance or were authorised by the court under s.681(2)(e).