Cobham Plc, Re Companies Act 2006

In deciding whether to sanction a scheme of arrangement, the court must consider four matters: compliance with the statutory requirements; fair representation of the class and bona fide voting without coercion; whether an intelligent and honest member acting in their own interests might reasonably approve the scheme; and whether the scheme contains any technical flaw or “blot”. The reasonableness question is assessed at the time of the scheme meeting. Later political or economic developments, even if they might affect how members would vote subsequently, do not invalidate a vote that was reasonably cast at the meeting.

Cobham plc applied for sanction of a scheme of arrangement under the Companies Act 2006. The scheme had been approved at a single class meeting by the statutory majorities. A shareholder objected, principally on the clarity of the offer-price adjustment for dividends and on the delay between the meeting and the sanction hearing, during which political and economic circumstances had changed.

The court considered whether the statutory requirements and the principles governing scheme sanction were satisfied, including whether the scheme remained one which an intelligent and honest member of the class might reasonably approve.

1. The court adopted the four questions identified in Re TDG plc [2009] 1BCLC 445: statutory compliance; fair representation and bona fide voting without coercion; reasonable approval by an intelligent and honest member acting in their own interests; and absence of any technical flaw or “blot”.
2. The directions for convening the meeting had been complied with. A single class meeting was proper, and the statutory majorities had been achieved. The members were fairly represented, and there was no reason to doubt that the majority had acted in the interests of the class as a whole.
3. The scheme documentation clearly stated that the headline offer price would be reduced by the announced dividend. The information was sufficiently brought to shareholders’ attention, notwithstanding the volume of material and the possibility that some shareholders were elderly.
4. The question whether an intelligent and honest member might reasonably approve the scheme had to be answered by reference to the circumstances at the time of the scheme meeting. Members could then take account of existing political and economic uncertainty when deciding how to vote. Subsequent events, including the calling of a General Election, a period of political uncertainty and the possibility that shareholders might vote differently if asked again, did not invalidate the earlier vote.
5. There was no technical flaw in the scheme. The objection was rejected and the scheme was sanctioned.