Uniq Plc, Re

A scheme of arrangement may form an integral part of a wider restructuring and the court may consider benefits arising from the restructuring when deciding whether members receive a sufficient benefit. The court’s power under Companies Act 2006, s 681(2)(e), to sanction financial assistance given pursuant to a scheme is not confined by the former statutory “whitewash” criteria. The court must assess each transaction in the circumstances of the company giving the assistance, considering whether it is financial assistance and its purpose. A clear clerical error in a special resolution may be corrected by construction when the resolution is read with the explanatory circular. The court retains an unfettered discretion to sanction a scheme, subject to statutory compliance, fair representation, bona fide voting and the scheme being one which an intelligent and honest member might reasonably approve.

Uniq plc petitioned for sanction of a scheme of arrangement under ss 895 and 899 of the Companies Act 2006. The scheme formed part of a restructuring intended to address a substantial defined benefit pension deficit and avoid the probable insolvency of the company and its principal subsidiary.

The court considered whether the scheme conferred a sufficient benefit on members, whether the low meeting turnout was acceptable, whether a numerical error in a special resolution could be corrected, whether elements of the restructuring involved unlawful financial assistance, and whether the statutory and discretionary requirements for sanction were satisfied.

1. Sanction granted. The scheme was sanctioned and the associated reduction of capital was confirmed.
2. Benefit to members. Although the scheme diluted the members’ existing equity substantially, the scheme was an integral part of a restructuring which would release the group from the pension deficit and preserve a viable company. It was therefore artificial to consider the scheme in isolation. The possibility that the scheme might take effect without completion of the wider restructuring was neither intended nor likely and did not justify disregarding the benefit.
3. Turnout. A low turnout by number is not necessarily concerning. It may reflect indifference or the prevalence of very small shareholdings. Concern would arise where there was cogent evidence that substantial numbers opposed the scheme and had been prevented or discouraged from voting.
4. Special resolution. Under s 283(6)(a) of the Companies Act 2006, the resolution could not be amended after notice. However, a clear error could be corrected as a matter of construction by reading the resolution with the circular. The correct number of shares was objectively clear, and the resolution was effective in that corrected form.
5. Financial assistance. The statutory questions were whether each transaction constituted financial assistance and, if so, whether it was given for the purpose of acquiring shares. The transaction had to be examined from the perspective of the company giving the assistance. The loans were made principally to secure the release of substantial pension liabilities and were in the interests of the relevant companies. They therefore fell within the exception in s 678(2), even though the share acquisition was known and intended.
6. Power under s 681(2)(e). The power to sanction financial assistance given pursuant to a scheme was unqualified. Satisfaction by analogy of the former s 155 “whitewash” conditions was not a precondition. In this case, the indemnities and costs were commercially necessary and benefited both creditors and members.
7. Discretion to sanction. The statutory requirements were met, the class was fairly represented, the statutory majority acted bona fide, and the scheme was one which an intelligent and honest member might reasonably approve. The scheme was the only viable means of preserving the group and retaining some value for members.