Re Jelf Group Plc

The court was asked to sanction a scheme of arrangement under Part (section 895) of the Companies Act 2006 to effect the takeover of Jelf Group Plc by Marsh and McLennon Acquisition Limited. The court found that all procedural requirements had been complied with, including properly convened meetings and the necessary voting majorities (well over 90% in favour).

The principal legal question was whether the scheme fell within s.895 as an "arrangement between a company and its members" when the company's role was largely administrative. The judge concluded that the scheme did fall within the statutory concept of an arrangement because the company's obligation to register transfers (and certain ancillary functions) sufficed, and that longstanding authority treats such share-purchase schemes as arrangements. On that basis, and because all other requirements were satisfied, the court sanctioned the scheme.

Background and parties: This was an application for court sanction of a scheme of arrangement under the Companies Act 2006 to enable the acquisition of the entire issued share capital of Jelf Group Plc by Marsh and McLennon Acquisition Limited. The company and interested parties were represented at the hearing.

Nature of the application: The applicant sought the court's sanction of a scheme in the familiar form by which shareholders sell their shares to a third-party purchaser in exchange for cash. The scheme meeting was held and the requisite majorities were obtained.

Issues framed by the court:

• whether the proposed transaction constituted a "compromise or arrangement" within s.895 of the Companies Act 2006 where the company has a largely administrative role; and
• whether the scheme satisfied the other statutory and procedural requirements for sanction.

Court's reasoning: The judge analysed the word "arrangement" in s.895 and expressed initial difficulty in seeing how a largely contractual sale between members and a purchaser, with minimal company participation, amounted to an arrangement with the company. Attention was given to the company's limited functions under the scheme (receipt of certain funds, power to consent to variations, and making entries in the register of members).

The court was referred to established authorities, notably Re Savoy Hotel Ltd [1981] Ch. 251, Re T & N Limited (No.3) [2007] 1 BCLC 563 and Re International Harvester Co. of Australia Proprietary Limited [1953] VLR 669, which take a broad view of "arrangement" and accept that the give and take need not be directly between company and members but may be between members and a third party with the company's role being to register transfers. Having regard to that body of authority and practical experience, the judge concluded that the registration obligation and ancillary functions were sufficient to bring the scheme within s.895. The judge therefore sanctioned the scheme, while noting that if the jurisdiction were being considered afresh he might have reached a different view, but he would not undermine long-standing practice and authority.

Procedural outcome: The scheme was sanctioned by the court because the statutory criteria and voting majorities were satisfied and the transaction fell within the established interpretation of "arrangement" under s.895.

The court sanctioned the scheme of arrangement. Although the judge expressed initial reservations about treating a primarily contractual sale of shares as an "arrangement between the company and its members" under section 895 of the Companies Act 2006, he concluded that established authority and the company's obligation to register transfers (together with ancillary functions) were sufficient to bring the transaction within the statutory concept of an arrangement. Because the formal requirements and voting majorities were satisfied, the scheme was sanctioned.