Columbus Energy Resources PLC, Re

When sanctioning a scheme of arrangement, the court must ensure compliance with the statutory requirements, proper class constitution, fair representation, bona fide voting without coercion, a scheme that an intelligent and honest member might reasonably approve, and no blot on the scheme.

Temporary legislation may modify the ordinary incidents of a members’ meeting. Under Schedule 14 to the Corporate Insolvency and Governance Act 2020, members may be prevented from attending or participating except by voting. The court must still direct a process that constitutes a meeting and achieves the statutory purpose. Where consultation rights are removed, the company must take particular care to explain the scheme fully and adequately.

Columbus Energy Resources plc applied for sanction of a scheme under Part 26 of the Companies Act 2006, under which its shareholders would transfer their shares to Bahamas Petroleum Co plc in exchange for shares in that company.

The scheme had been approved by the statutory majorities at a shareholders’ meeting convened by order. Because of the COVID-19 restrictions, shareholders were not permitted to attend physically and could participate only by voting. The central issue was whether that process constituted a meeting for the purposes of the statutory scheme procedure, having regard to Schedule 14 to the Corporate Insolvency and Governance Act 2020.

1. The scheme was sanctioned. The court applied the established sanction framework summarised in Re TDG [2009] 1 BCLC 445. The statutory requirements had been met: the convening order was complied with, the statutory majorities were achieved, and the scheme involved a sufficient element of give and take to constitute a compromise or arrangement. The latter requirement was supported by Re Jelf Group plc [2014] EWHC 3857.

2. A single class was appropriate. The shareholders had the same existing rights and were offered the same arrangement. Insignificant differences in fractional entitlements did not fracture the class. Irrevocable voting undertakings were not class-creating, following the reasoning considered in Re Telewest Communications plc [2004] EWHC 924 (Ch). Benefits given to directors flowed from loss of office rather than shareholder status and constituted an extraneous interest relevant to fairness, but not class constitution.

3. Schedule 14 altered the ordinary requirements for a members’ meeting. Paragraph 3 applied to a meeting of a class of company members and modified Part 26. It permitted electronic or other voting, allowed participants not to be together at the same place, and removed a member’s right to attend in person or participate otherwise than by voting. Accordingly, consultation between members, although ordinarily an important incident of a scheme meeting, was not indispensable where the statutory modification applied.

4. The process nevertheless had to remain a meeting as a matter of language and had to achieve the statutory purpose of determining whether the scheme should be approved. The approach concerning a remote meeting in Capital Trust Direct plc [2020] EWHC 969 (Ch) remained applicable to creditors, for whom no equivalent legislative modification existed. In the present case, the formal process was sufficient.

5. Because members could not consult at the meeting, the company had to take particular care to explain the scheme fully and adequately. That requirement was met through the detailed explanatory statement and supplementary information. The class was fairly represented, the majority acted bona fide without coercion, an intelligent and honest member might reasonably approve the scheme, and there was no blot on its face. An order sanctioning the scheme was therefore made.