In the matter of Smith & Williamson Holdings Limited

On an application to sanction a scheme, the court must first verify statutory and procedural compliance, including the convening order, class constitution, the existence of a compromise or arrangement, the statutory majorities and the explanatory statement.

Any undisclosed interest must be assessed for materiality by asking whether there is a real possibility that a shareholder would take a different view of the scheme. A wholly de minimis interest does not invalidate the vote or deprive the court of jurisdiction to sanction.

The discretionary assessment concerns fair representation, bona fide voting without coercion, whether an intelligent and honest member might reasonably approve the scheme, and whether there is any blot on it.

Smith & Williamson Holdings Limited applied for sanction of a scheme under Part 26 of the Companies Act 2006. The scheme provided for the acquisition of the company's entire issued share capital by the Tilney Group.

The court had previously made convening and directions orders in relation to the scheme. At the sanction hearing, the issues included compliance with those orders, class constitution, the statutory requirements for a compromise or arrangement, the voting majorities, the explanatory statement, the materiality of an undisclosed director interest, fair representation and the overall fairness of the scheme.

1. Statutory compliance. The court was satisfied that the convening order had been complied with, the A shareholder class had been correctly constituted, the scheme was a compromise or arrangement, and the statutory majorities had been achieved.
2. The explanatory statement complied with Companies Act 2006, section 897(2)(a). The omission of the director's indirect 0.0007 per cent interest in the Tilney Group did not breach section 897(2)(b)(i). The relevant question was whether there was a real possibility that a shareholder would take a different view of the scheme. The interest was wholly de minimis, worth approximately £5,883, and was not material. It therefore did not affect the validity of the vote, the court's jurisdiction or the exercise of its discretion.
3. Discretionary factors. The court applied the established scheme-sanction framework. The high turnout and voting results showed that the meeting fairly represented the class and that the statutory majority had acted bona fide, without coercing the minority to promote adverse interests. Minor differences between shareholder interests did not require further subdivision where that would not materially affect the relevant assessment.
4. The scheme was one which an intelligent and honest member of the class, acting in his own interests, might reasonably approve. Although some shareholders had genuine concerns about private-equity ownership and the future structure of the business, the overwhelming vote in favour supported the conclusion that the scheme was fair. The court identified no blot on the scheme.
5. All requirements for sanction were satisfied. The scheme was sanctioned in the terms sought.