Sirius Minerals Plc, Re

On an application to sanction a scheme of arrangement under Companies Act 2006, the court must apply the statutory scheme-sanction principles to registered members, rather than beneficial owners who are not members. The relevant class is identified by the rights of members under the company’s constitution and the scheme. Fair representation is assessed by the members who attend and vote, provided the class is properly constituted and the voting is bona fide. The court must also ask whether an intelligent and honest member of the class, acting in his own interests, might reasonably approve the scheme. Dissatisfaction with the price, or the fact that beneficial owners were unable to vote directly, does not prevent sanction where the statutory requirements are met, the meeting was fairly conducted, and the scheme offers a realistic means of preserving value.

Sirius Minerals plc applied under Part 26 of the Companies Act 2006 for sanction of a scheme under which all its ordinary shares would be acquired by Anglo American Projects UK Ltd at 5.5 pence per share. The company faced substantial financing needs and was likely to enter administration without the transaction.

A court-directed meeting of registered members approved the scheme by the statutory majorities. Objections were made that many beneficial owners held shares through nominees and had not been able to vote directly, that the price was inadequate, and that the voting materials were unclear. The central issues were whether the statutory and procedural requirements had been satisfied, whether the class was fairly represented, and whether the scheme was one which an intelligent and honest member might reasonably approve.

1. Statutory requirements. The meeting had been properly convened and the scheme documents and voting forms had been sent to the registered members. The statutory majorities were obtained. Under sections 112(2) and 284(3) of the Companies Act 2006, a member is a person registered as a member and each member has a vote. Beneficial owners are not members for Part 26 purposes. The company was therefore required to communicate with registered members, not directly with beneficial owners. (paras [18]–[20])
2. Class and fair representation. There was one class because all registered members had the same rights under the constitution and the scheme. The sizeable number of speakers and votes, including substantial opposition, showed that members with differing views had been fairly represented. The absence of direct votes by beneficial owners did not alter that conclusion. (paras [21]–[22])
3. Bona fide voting. There was no suggestion that members voting for the scheme acted oppressively or for a collateral purpose. They were entitled to conclude that accepting the offer was preferable to the likely alternative of insolvency and a worse return. (para [23])
4. Reasonable approval. The question was whether an intelligent and honest member of the class, acting in his own interests, might reasonably approve the scheme. That test was satisfied because, on the evidence, the offer was the only available means of preserving some value and there was no realistic alternative funding or offer. (para [24])
5. No other legal impediment or defect was established. Complaints about the voting forms did not show that the result had been adversely affected. The scheme was accordingly sanctioned under section 899 of the Companies Act 2006. (paras [25]–[28])

This was a first-instance application. The company issued its Part 26 claim on 29 January 2020. On 5 February 2020, Insolvency and Companies Court Judge Mullen directed the convening of a single-class meeting. The meeting was held on 3 March 2020, and the High Court sanctioned the scheme on 13 March 2020. No appeal is stated in the judgment.