Smith & Williamson Holdings Ltd, Re

The applicant obtained an order under section 896 of the Companies Act 2006 permitting the convening of a single scheme meeting of holders of A ordinary shares to consider a scheme of arrangement to effect a sale to Tilney entities. The court applied the established test for class constitution (derived from Sovereign Life Assurance v Dodd and Re Hawk Insurance) focusing on differences in rights rather than commercial interests and on whether differences made consultation "impossible". The judge analysed four potential class issues: the mix-and-match election for large individual holdings, reserved management incentive shares, bad‑leaver provisions under the Nominee and Leaver Arrangements Deed, and amendments relating to an Irish acquisition (the Oracle SPA). Provisionally the court was satisfied that no obvious jurisdictional impediment to sanction existed and that a single class meeting was appropriate, subject to the more detailed assessment at sanction.

Background and nature of application:

• This was an application under section 896 of the Companies Act 2006 for permission to convene scheme meetings of holders of A ordinary shares so that a scheme of arrangement could be considered which would enable the company to be acquired by Tilney Group Limited and Symmetry Topco Limited as part of a wider combination.

Parties and documents: The scheme affected A ordinary shareholders and, in terms, the company’s D ordinary shares (all held by AGF Management Limited) though no separate meeting for D shares was sought. Scheme documentation included letters to shareholders, a mix-and-match facility for Eligible Individual Shareholders, leaver arrangements and related deeds, and evidence from the company’s group legal director.

Issues framed:

1. Whether a single class of A shareholders should be convened or whether separate class meetings were required (class constitution);
2. The relevance to class of the mix-and-match facility (different composition of consideration for large individual holders and exclusions for Restricted Overseas Shareholders);
3. Whether reserved management incentive shares (3% of Violin Topco) created a separate class issue;
4. The effect on class constitution of the Nominee and Leaver Arrangements (bad leaver clips and differences between pre- and post-scheme positions);
5. Consequences of amending the Oracle SPA for some sellers and any resulting class issues;
6. Whether irrevocable undertakings given by shareholders created a class problem.

Court’s reasoning and outcome:

• The judge set out and applied the relevant approach: class questions turn on differences in rights not commercial interests; comparison must be between rights released/varied and new rights; material differences do not automatically require separate classes; and the scheme must be considered together with contemporaneous arrangements.
• On the mix-and-match facility the court accepted that although the blend of consideration differs for Eligible Individual Shareholders, the underlying value and rights were sufficiently similar that it was unlikely to be impossible for members to consult together.
• The 3% management incentive reserve did not yet produce a class issue because no beneficiaries were identified and no assurances had been given.
• The Nominee and Leaver Arrangements (bad leaver clips) raised the most significant point. The judge accepted that differences exist and that some are more than insubstantial, but concluded provisionally that, taken in the round and compared to pre-scheme positions, the variations were sufficiently similar that a single class meeting remained appropriate. The judge emphasised that questions of fairness and final determination of class remained for the sanction stage.
• Proposed amendments to the Oracle SPA were likely not to create a class issue but were not finalised; the court expressed a provisional view only.
• Irrevocable undertakings given by a large proportion of members (about 70.9%) without collateral benefit were not class-creating.

Practical and procedural remarks: The judge noted that the Practice Statement on creditor schemes does not directly apply to member schemes but accepted that adopting parts of it by analogy may be sensible in some cases. He gave only provisional views and stressed that class objections can still be raised at the sanction hearing. The order required notice of at least 14 clear days to shareholders (in practice likely 19 days).

Permission was granted to convene a single scheme meeting under section 896 Companies Act 2006. The court gave provisional reasons on class constitution, applying the Sovereign Life/Re Hawk principles, and concluded there was no obvious jurisdictional impediment to sanction; final questions of class and fairness remain for the sanction hearing.