Telford Homes Plc, Re

The court has an unfettered discretion whether to sanction a scheme of arrangement, but must exercise it rationally and judicially. Sanction will generally be appropriate where the statutory requirements have been met, the relevant class has been fairly represented, the statutory majority has acted bona fide without coercing the minority, and an intelligent and honest member of the class might reasonably approve the scheme. The court must also identify no additional technical or legal defect, or “blot”, affecting the scheme. The court should respect the commercial judgment of those involved and should not unduly second-guess it.

Telford Group plc applied for the sanction of a scheme of arrangement under Part 26 of the Companies Act 2006. The scheme was intended to enable CBRE Group Inc to acquire the entire issued share capital of Telford Group plc for 350 pence per share.

A single class meeting had been ordered. Of the participating shareholders, 258 voted in favour and 75 against, producing statutory majorities of 77.46 per cent in number and 93.5 per cent in value. The court considered whether the statutory requirements and the established criteria for sanction had been satisfied.

1. The application was granted and the scheme was sanctioned. The court’s discretion was unfettered, but had to be exercised rationally and judicially.
2. Applying the four matters identified in Re TDG plc [2009] 1 BCLC 445, the court was satisfied that the statutory provisions had been complied with; the single class had been properly constituted; and the statutory majorities had been obtained.
3. The relevant shareholders had been fairly represented. There was no evidence that the majority had acted other than bona fide or had coerced the minority in order to advance interests adverse to the class.
4. The statutory majorities were sufficient despite the relatively low turnout measured against all Scheme Shares. The turnout figures did not provide a reason to refuse approval.
5. The court found no “blot” on the scheme, meaning no additional supervening technical or legal defect. The scheme was unanimously recommended by the directors and supported by financial advice. The court therefore accorded appropriate respect to the commercial judgment underlying the arrangement and saw no reason not to sanction it.

Not stated in the judgment.