JEFL Group Plc, Re

For the purposes of section 895 of the Companies Act 2006, “arrangement” has a broad meaning. A takeover scheme may qualify even where the company’s principal function is administrative and the commercial give-and-take occurs between members and a third-party purchaser. An obligation on the company to register the transfer of shares, thereby ending the members’ status, may be sufficient company participation. Longstanding authority and commercial reliance are important considerations when assessing whether a familiar form of scheme falls within the statutory jurisdiction.

The company sought sanction of a scheme under which Marsh and McLennan Acquisition Limited would acquire all shares in JEFL Group Plc for cash. The members had approved the scheme by the required majorities. The court was satisfied that the procedural requirements were met, but questioned whether the scheme constituted an “arrangement between a company and its members” within section 895 of the Companies Act 2006, given the company’s limited role.

The central issue was whether the company’s functions, particularly registering transfers of shares, were sufficient to bring the transaction within the statutory scheme jurisdiction.

1. The scheme was sanctioned. The statutory and procedural requirements were satisfied, including proper notice and approval by the necessary majorities.

2. Section 895 of the Companies Act 2006 requires a compromise or arrangement between the company and its members. Although this transaction involved no compromise, the concept of “arrangement” is interpreted broadly.

3. The company’s obligation to register the transfer of shares was sufficient participation to constitute an arrangement between the company and its members. The fact that the commercial exchange was principally between the members and a third-party purchaser did not prevent the scheme from falling within section 895. The court applied the reasoning in Re Savoy Hotel [1981] Ch. 251.

4. The court relied on the broad summary of the jurisdiction in Re T & N Limited (No.3) [2007] 1 BCLC 563. It also applied the liberal formulation described in Re International Harvester Co. of Australia Proprietary Limited [1953] VLR 669, subject to statutory limits such as ultra vires conduct, the existence of a special statutory procedure, or an attempt to evade a statutory restriction.

5. Although the judge considered that, without the weight of history and authority, the conclusion might be open to doubt, longstanding judicial acceptance and reliance on this form of transaction made it inappropriate to undermine the established understanding.

The scheme was sanctioned.

Not stated in the judgment.