In the matter of Smith & Williamson Holdings Limited

The court sanctioned a scheme of arrangement under Part 26 of the Companies Act 2006 permitting the acquisition of the entire issued share capital of Smith & Williamson Holdings Limited by the Tilney Group. The judge applied the established statutory and discretionary tests for sanctioning schemes: compliance with the convening order, correct class composition, that the proposal was a compromise or arrangement within the meaning of the statute, achievement of the statutory majorities, and sufficiency of the explanatory statement under section 897. The court found full compliance with the convening order, accepted the class constitution, held that there was sufficient give and take to constitute an arrangement, and that the statutory majorities were comfortably obtained. Although a director had failed to disclose an indirect, very small interest in Permira Fund V in the explanatory statement, the court held that the interest was de minimis and not material under section 897(2)(b)(i). Applying the discretionary factors derived from Re TDG plc, the court was satisfied the class was fairly represented, that an intelligent and honest member might reasonably approve the scheme, and that there was no blot on the scheme, and therefore ordered sanction.

This was an application for the sanction of a scheme of arrangement under Part 26 of the Companies Act 2006 by Smith & Williamson Holdings Limited to enable the Tilney Group to acquire the company's entire issued share capital. The company has A and D shares; all D shares (held by AGF Management Limited) consented to be bound and no meeting was convened for them. The A shareholders comprised an employee benefit trust, current partners and employees and their relatives, and former partners and employees and their relatives. The total implied Scheme value was approximately 625 million, payable by cash and the issue of shares in Symmetry Topco (Guernsey) Limited (STGL).

Procedural history: the application followed two prior hearings in this court. The judge had given a detailed judgment on 18 October 2019 concerning convening and class issues ([2019] EWHC 3021) and gave directions on 30 June 2020 when material terms changed ([2020] EWHC 1980). The present hearing addressed whether statutory requirements and the court's discretionary tests for sanction were satisfied.

The issues framed by the court included: (i) compliance with the convening order and with section 897 (in particular the adequacy of the explanatory statement); (ii) correct composition of the class for the meeting; (iii) whether the proposal was a "compromise or arrangement"; (iv) whether the statutory majorities by number and value were achieved; and (v) the discretionary questions from Re TDG plc: fair representation of the class, whether an intelligent and honest member might reasonably approve the scheme, and whether there was any blot on the scheme.

Reasoning and subsidiary findings: the judge found compliance with the convening order and accepted the class constitution, referring to his earlier reasons and further evidence. He concluded the proposal met the statutory definition of a compromise or arrangement. The voting figures showed overwhelming approval (564 in favour, 38 against by number; about 96.23% by value in favour) and high turnout; the statutory majorities were met comprehensively and would have been met even if non-voters had voted against. On section 897, the explanatory statement was adequate except for a late disclosure failure concerning a directors indirect interest in Permira Fund V; the court found the interest amounted to only 0.0007% of Tilney and about 5,883 in value and was de minimis and not material under section 897(2)(b)(i). Applying the discretionary factors, the judge accepted the scheme was one that an intelligent and honest member might reasonably approve, addressed concerns raised by a minority of shareholders, and found no blot. Accordingly, the court sanctioned the scheme and ordered it in the terms sought.

This was a first-instance application for sanction of a Part 26 scheme. The court ordered that the scheme be sanctioned. The judge concluded all statutory conditions were met: the convening order had been complied with, the class composition was correct, the proposal amounted to a compromise or arrangement, the statutory majorities had been achieved, and the explanatory statement complied with section 897. A late, very small undisclosed indirect interest of a director in Permira Fund V was held to be de minimis and not material. On the discretionary limb from Re TDG plc the class was fairly represented, an intelligent and honest member might reasonably approve the scheme, and there was no blot; accordingly the scheme was sanctioned "in the terms in which it is sought."