Old Mutual Plc, Re

For the purposes of Companies Act 2006, separate schemes forming part of a wider commercial restructuring should not be treated as one composite scheme merely because they are recommended as a package. The court must consider their legal structure, commercial purposes and ability to operate independently.

Sections 641(2A)–(2C) target cancellation schemes used to avoid stamp duty on takeovers. They do not prohibit genuine intra-group restructurings or demergers. A purposive interpretation remains an interpretation of the statutory language and cannot create a materially different statutory regime. On a provisional assessment under sections 645 and 646, a creditor must show a real likelihood that the reduction would cause inability to pay the debt when due. Adequate liquid assets and a suitable undertaking may justify dispensing with a creditors’ list.

Old Mutual plc applied under section 896 of the Companies Act 2006 for permission to convene meetings to consider two schemes forming part of its proposed managed separation.

The First Scheme would demerge Quilter through a reduction of capital and distribution of Quilter shares. The Second Scheme would insert Old Mutual Limited, a South African company, as the new holding company through cancellation or transfer of the Company’s shares.

The central issues were whether the reductions infringed section 641(2A), whether the two schemes should be treated as one composite scheme, whether members could vote in single classes, and whether the court should provisionally dispense with settlement of a creditors’ list under sections 645 and 646.

1. Permission to convene meetings. The court ordered the convening of separate meetings for the First Scheme and Second Scheme.
2. Section 641. The First Scheme did not engage section 641(2A), because it did not provide for any person to acquire all the Company’s shares. The Second Scheme potentially engaged section 641(2A), but the prohibition was disapplied by section 641(2B): the Company would have a new parent undertaking, all members would become members of it, and their equity proportions would remain substantially the same.
3. Separate schemes. The schemes were legally separate and the First Scheme could operate independently if the Second Scheme failed. Each also had a distinct commercial purpose. The Ramsay line of authority did not justify treating them as a single composite scheme. The legislative purpose of section 641 was to prevent the use of cancellation schemes to avoid stamp duty on takeovers, not to restrict genuine demergers or intra-group reorganisations.
4. Purposive construction. The court did not need to decide the applicant’s alternative arguments concerning a composite scheme. Purposive interpretation requires attention to statutory purpose, but the court must interpret the language enacted and cannot substitute a different statutory scheme or undertake impermissible judicial legislation.
5. Classes. The members could properly vote in a single class on each scheme. Their legal and economic positions were sufficiently similar, and the unwind provisions meant that the First Scheme did not create relevant differences requiring separate classes. Changes in registered membership before implementation of the Second Scheme did not prevent the meeting being a meeting of members under sections 895 and 896.
6. Creditors. The court applied the “real likelihood” test in section 646(1)(b). The relevant assessment included the nature and amount of liabilities, the quality and liquidity of retained assets, surplus coverage, and the terms of the undertaking preserving those assets. On the proposed Locked Box, including a 10 per cent margin and sufficiently liquid permitted assets, there was no realistic prospect that a creditor could establish the statutory test. The court therefore expressed the provisional view that a list under section 646 need not be settled.

First instance decision. The judgment does not state any prior appellate decision.