Aon Plc, Re

On an application to sanction a scheme of arrangement, the court must be satisfied that the statutory requirements have been met, the relevant class has been fairly represented and acted without coercion, an intelligent and honest member of the class might reasonably approve the scheme, and there is no blot on it.

A proposed modification may be approved where a reasonable shareholder would not have taken a different view of the scheme. The power to modify must not be used to impose something substantially different from what the class approved. A material change of circumstances may justify modification.

Aon plc applied for sanction of a scheme under Part 26 of the Companies Act 2006 involving cancellation of its A Ordinary shares, a reduction of capital and the issue of shares in a new Irish holding company. It also sought confirmation of the reduction under section 641(1)(b).

The statutory majorities approved the scheme and the reduction. Before the sanction hearing, the company proposed modifications to reduce the nominal value of the new shares and alter the scheme record time, principally because of market volatility and the operational effects of the COVID-19 pandemic. The central issues were whether the scheme and reduction should be sanctioned and whether the proposed modifications were permissible.

1. Sanction of scheme. The court sanctioned the scheme. The statutory requirements had been complied with: the arrangement fell within section 895 of the Companies Act 2006, the class was properly constituted, the explanatory statement complied with section 897, and the statutory majority required by section 899(1) had been obtained.
2. The court applied the four matters summarised in Re TDG plc [2008] EWHC 2334 (Ch): statutory compliance; fair representation and bona fide voting without coercion; whether an intelligent and honest member acting in his or her own interests might reasonably approve the scheme; and the absence of any blot. The class had been fairly represented, the voting showed no coercion, the scheme was one which such a member might reasonably approve, and no blot had been identified.
3. Modifications. The court approved the reduction in the nominal value of the new shares and the alteration to the scheme record time. The appropriate question was whether the modification was likely to cause a hypothetical reasonable shareholder to take a different view of the scheme. The first modification responded to a material change of circumstances, including the COVID-19 pandemic and market volatility, and avoided the risk that the new shares would not be fully paid or eligible for listing. Neither modification materially altered the rights approved by the shareholders.
4. The court adopted the caution stated in In the matter of Equitable Life Assurance Society [2002] BCC 319: the modification power may address immaterial error, oversight or changed circumstances, but must not be used to impose something substantially different from what the class approved.
5. Reduction of capital. The reduction was confirmed. Shareholders were treated equitably, the proposals were properly explained, creditors were safeguarded, and the reduction served a discernible purpose within the scheme. Section 641(2A) was no impediment because the exception in section 641(2B) applied: all members would become members of the new parent undertaking in the same or substantially the same proportions.