Ophir Energy Plc, Re Companies Act 2006

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements and procedural safeguards have been met, the relevant class was fairly represented, the statutory majority acted bona fide without coercion, the scheme is one an intelligent and honest member might reasonably approve, and there is no blot on the scheme.

An explanatory statement must contain the information necessary for members to form a reasonable judgment about the scheme. Materially inadequate or inaccurate disclosure may prevent the court relying on the vote. Concerns about disclosure should be raised promptly and specifically. A late, vague objection from a non-attending shareholder will carry little weight where the court and company were given no proper opportunity to investigate or address it.

Ophir Energy Plc applied under Part 26 of the Companies Act 2006 for sanction of a scheme under which Medco Energi Global PTE Ltd would acquire Ophir’s issued and to be issued ordinary share capital for cash consideration of 57.5 pence per share.

The scheme had been approved at a court meeting by the statutory majority. Shortly before the sanction hearing, Legal & General Investment Management raised general objections that the explanatory statement omitted information about the company’s assets, prospects and value. It did not attend the court meeting or the sanction hearing. The court also considered a recently agreed sale of an interest in offshore Mexico. The central issues were whether the explanatory statement was inadequate and whether the later sale required a further vote.

1. Sanction test. The court sanctioned the scheme. It applied the established fourfold approach: compliance with the statutory provisions; fair representation of the class and bona fide voting without coercion; whether an intelligent and honest member of the class might reasonably approve the scheme; and absence of any blot. The low turnout was within the norms for a takeover scheme, the statutory majority was properly obtained, the scheme was recommended by the board, and the increased consideration followed competitive tension.
2. Explanatory statement. Under section 897 of the Companies Act 2006, the statement had to contain the information necessary to enable members to form a reasonable judgment on whether the scheme was in their interests. Full and accurate information was required. If information were materially inaccurate, incomplete or inadequate, the court might be unable to rely on the affirmative vote. The extent of disclosure depended on the circumstances. (See paras [21]-[22].)
3. Late objections and court assistance. If there were reasonable grounds to doubt the adequacy of disclosure, the court could require further disclosure, subject to safeguards for confidentiality, or require the company to address the issue in evidence. An alleged asymmetry of information was not itself a reason to regard opposition as futile. However, LGIM’s general and late objections were not supported by attendance, evidence or a focused explanation. The court therefore placed no weight on them. (See paras [32]-[40].)
4. Later transaction. The agreed sale of the Mexican interest was consistent with the explanatory statement’s reference to rationalising frontier exploration assets. The sale was not a material adverse change likely to have affected the vote, particularly as the possibility of the sale had been publicly mentioned earlier. A further court meeting was unnecessary. (See paras [41]-[44].)
5. On Bidco’s undertakings to be bound by and give effect to the scheme, the scheme was sanctioned. (See para [45].)

First-instance decision. No appellate history is stated in the judgment.