PA Consulting Group Ltd, Re

In determining classes for a scheme of arrangement, the court must examine members’ rights rather than their commercial interests. The relevant comparison includes rights released or varied and rights conferred by the scheme, together with collateral arrangements forming part of the overall transaction. A broad approach is required, but materially different rights may require separate classes. Differences in the form of consideration, including elections and interdependence between groups, can be material. Personal tax circumstances and de minimis contractual exposures ordinarily do not justify further subdivision. The court may approve remote class meetings where statutory restrictions prevent attendance in person, provided the arrangements allow effective participation.

PA Consulting Group Limited applied under Companies Act 2006, Part 26, for orders convening meetings to consider a scheme for its acquisition by Green Consulting Solutions Limited, a company controlled by Jacobs Engineering Group Inc. The proposed consideration was approximately £1.795 billion, payable in cash and shares in varying proportions to different groups of shareholders.

The company proposed separate classes reflecting existing share rights, the form of consideration, elections available to continuing managers, and the position of the employee benefit trust. The issues were whether the proposed classes were correctly constituted and whether the meetings could be conducted remotely during COVID-19 restrictions.

1. Class composition. The court accepted that class composition depends on members’ rights, not their interests. Members belong to the same class where their rights are not so dissimilar that they cannot consult together with a view to their common interest. The analysis must consider both rights released or varied and new rights conferred by the scheme. A broad approach is appropriate, and differences do not automatically require separate classes.
2. Commercial differences do not determine class composition, although they may be relevant at the sanction stage. The court must also consider collateral arrangements entered into alongside the scheme.
3. The Investor was entitled to a separate class because it held all A Ordinary Shares, received a unique cash arrangement, and transferred loan notes under the Implementation Deed. Exiting Managers also required a separate class because they received cash only, whereas Rolling Managers could receive cash and Consideration Shares.
4. Rolling Managers and the employee benefit trust required separate classes because the amount of Consideration Shares available to the trust depended on elections made by the Rolling Managers. The different rights attached to Preference Shares, B Ordinary Shares and C Ordinary Shares, together with the absence of uniform holdings, justified three separate Rolling Manager meetings.
5. The court declined to subdivide classes further because possible reductions arising from Leakage, warranties limited to a de minimis exposure, and tax-efficient election options did not alter rights against the company in a way requiring separate classes. Those matters reflected individual interests or contractual arrangements insufficient to fracture the classes.
6. Remote meetings. Paragraph 3 of Schedule 14 to the Corporate Insolvency and Governance Act 2020 meant that members could not insist on being present in person or participate otherwise than by voting. The proposed virtual-meeting arrangements, including written questions and remarks, were appropriate. The court also stated that evidence concerning the conduct of the meetings should desirably be provided at the sanction hearing.
7. Subject to a minor amendment concerning the remote-meeting arrangements, an order was made convening the three requested court meetings.