TISO Blackstar Group Se Plc, Re (Supplemental)

In assessing whether a failure to announce a change in a director’s scheme-related election was material, the court asks whether there was a real risk that the omission would have affected shareholders’ decisions. The relevant decisions include both voting on the scheme as a whole and elections between continuation and exit. A small change which does not affect the number of shares capable of being cashed out, and which leaves the director’s predominant election unchanged, may be immaterial.

The judgment concerned the preparation of form SH19 following a scheme involving Tiso Blackstar Group SE plc. After the scheme circular had been distributed, the chief executive changed his election in respect of 1,500,000 shares from continuation to exit. No announcement was made of the change.

The court had to decide whether the omission was material, including whether there was a real risk that it would have caused a scheme shareholder to vote differently on the scheme or to make a different continuation or exit election.

1. Materiality test. The court asked whether the omission created a real risk that any scheme shareholder would have voted differently on the scheme as a whole or would have made a different continuation or exit election.
2. Application. The chief executive continued to make a continuation election for 90 per cent of his shareholding. A shareholder guided by the directors’ conduct was unlikely to alter course because the election had changed from wholly continuation to 90 per cent continuation.
3. The relevant proportion of directors’ shares making continuation elections changed only from 25.35 per cent to 24.80 per cent. The movement was very small and had no impact on the total number of shares capable of being cashed out.
4. The omission therefore had no material effect on shareholder decision-making. The court held that the failure to announce the change was immaterial.