Cello Health PLC, Re

On an application to sanction a scheme of arrangement, the court must be satisfied that the statutory requirements and any convening order have been complied with, the explanatory statement is adequate, the relevant class has been properly constituted and fairly represented, and the statutory majority has acted bona fide without coercing the minority. The court must also ask whether an intelligent and honest member of the class might reasonably approve the scheme and whether the scheme contains any blot. Where those requirements are satisfied, including by an overwhelming vote and a substantial premium for shareholders, the court may sanction the scheme under Companies Act 2006, Part 26.

Cello Health Plc applied for sanction of a scheme of arrangement under Part 26 of the Companies Act 2006. The scheme provided for Pharma Value Demonstration Bidco Limited to acquire the company’s issued and to be issued share capital for cash consideration. The shares were listed on AIM and the consideration represented a substantial premium over the last closing market price.

The court considered statutory compliance, compliance with the convening order, the adequacy of the explanatory statement, class constitution, shareholder representation, the statutory vote, the commercial merits of the scheme and whether any blot affected the scheme.

1. The statutory requirements were satisfied. The company fell within section 895 of the Companies Act 2006, and the proposal constituted a compromise or arrangement. The convening order was complied with, and the explanatory statement complied with section 897 by explaining the scheme and addressing the directors’ interests.
2. A single class was properly constituted because all shareholders had the same existing rights and were offered the same terms. Irrevocable undertakings and non-binding letters of intent from some shareholders did not, of themselves, create a class issue. The court applied the approach in Re Telewest Communications Plc (No 1) [2004] EWHC 924 (Ch).
3. The class was fairly represented. The turnout was respectable, and there was no indication that the statutory majority had acted other than bona fide or had coerced the minority to promote interests adverse to the class.
4. The scheme was one which an intelligent and honest member of the class might reasonably approve. Relevant considerations included the unanimous recommendation of the directors, professional advice, the overwhelming statutory majorities, adequate explanation of the scheme and the substantial premium offered for the shares.
5. No blot affecting the scheme was identified. The scheme was therefore sanctioned in the terms sought by the company.