Randall & Quilter Investment Holdings Plc

In sanctioning a scheme of arrangement and associated reduction of capital, the court held that shareholders need separate classes only where their rights differ so substantially that they cannot consult together in pursuit of their common interests. Different methods of holding or transferring the new shares, including certificated shares and CREST-settled depository interests, were merely machinery and did not create different class interests.

An inadvertent failure by registrars to implement the company’s properly chosen record date may constitute an accidental omission. The court may nevertheless sanction the scheme where the error caused no material prejudice, having regard to voting results, shareholder knowledge and the practical consequences of reconvening the meeting.

Randall & Quilter Investment Holdings Plc sought court sanction for a scheme under sections 895 and following of the Companies Act 2006, together with confirmation of a reduction of share capital. The scheme was intended to redomicile the group to Bermuda by introducing a new parent company and exchanging existing ordinary shares for shares in that company.

The court meeting approved the scheme by substantial majorities. Two issues required consideration: whether certificated and non-certificated shareholders should have constituted separate classes, and whether the meetings were invalid because the notice mailing list had been prepared using a record date five days earlier than the date instructed by the company. The court also considered whether, despite any accidental omission, the scheme should be sanctioned.

1. The court sanctioned the scheme of arrangement and confirmed the associated reduction of capital.

2. For class composition, members form separate classes where their rights are sufficiently different to make it impossible for them to consult together in pursuit of their common interests, applying Re Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 and Re Hellenic and General Trust Limited [1975] 3 All ER 382. The certificated and non-certificated shareholders had the same substantive interests. Depository interests enabling CREST settlement were a matter of machinery, and did not make a separate class necessary.

3. The company had instructed that the record date should be 15 May, but its registrars prepared the mailing list by reference to 10 May. Applying by analogy the reasoning in Peninsular and Oriental Steam Navigation Company v Eller and Co and Another [2006] EWCA Civ 432, the registrars’ failure to implement the company’s correct instructions was, from the company’s perspective, an accidental omission. The omission therefore did not itself invalidate the meetings.

4. The court retained a discretion whether to sanction the scheme. It considered the votes cast by the affected placees, the information otherwise made available to them, the overwhelming majorities and the absence of demonstrated prejudice. Reconvening the meeting would have caused unnecessary expense and complication. The error was regrettable but did not justify withholding sanction.