Re PA Consulting Group Ltd

The company sought an order under Part 26 of the Companies Act 2006 to convene meetings of classes of members to consider a scheme of arrangement for the acquisition of the company. The principal issues were the correct composition of classes for voting and whether court meetings could be held by remote means. The court applied the established class-composition test (focusing on members' rights rather than commercial interests and assessing rights released and new rights conferred) and concluded that the investor holding all A ordinary shares must form a class of its own, the Exiting Managers (cash-only recipients) must be separate, the EBT must be separate because its entitlement depends on elections by Rolling Managers, and the Rolling Managers should be convened in three separate meetings corresponding to their holdings of B ordinary, C ordinary and Preference shares because those holdings involve materially different rights and election mechanics. The court also approved holding the meetings virtually under paragraph 3 of Schedule 14 to the Corporate Insolvency and Governance Act 2020 and directed use of the Company’s proposed remote participation arrangements.

This was a first-instance convening hearing under Part 26 of the Companies Act 2006. The applicant company sought orders to convene class meetings to consider a scheme of arrangement under which Bidco, controlled by Jacobs, would acquire the entire issued share capital of PA Consulting Group Limited for an aggregate consideration of about 1.795 billion.

Background and parties: The company had a complex capital structure: A, B and C ordinary shares and Preference shares, plus intermediate loan notes (ILNs). The Investor (Carlyle group entity) held all A ordinary shares and also the ILNs. Other members comprised a large number of managers and employees and an employee benefit trust (EBT). The Scheme divided shareholders into investor, Exiting Managers, Rolling Managers and the EBT and provided differing mixes of cash and shares in Bidco as consideration, with elections available to Rolling Managers and a Scale-back Percentage limiting issuance of Consideration Shares; the Implementation Deed and a Management Warranty Deed formed part of the contractual matrix (including a Leakage mechanism and a cap on warranty claims of
).

Nature of the application: The company applied for directions to convene class meetings under Part 26. The court was asked to determine (i) the appropriate class composition given differing share rights and the Schemes allocation mechanics, and (ii) whether the Court meetings may be held by remote means in light of COVID-19.

Issues framed by the court: The central questions were whether members should be split into multiple classes by reference to (a) the legal rights attaching to their share classes, and (b) differences in the form of consideration (cash-only versus cash plus elective share rollover), and whether collateral arrangements (Implementation Deed, Management Warranty Deed) affect class composition.

Reasoning and conclusions: The court applied the established authorities on class composition, emphasising analysis of rights released and new rights conferred, not commercial interests. The Investor (A ordinary holder and ILN holder) was treated as a distinct class. Exiting Managers who receive cash only were separate because cash-only treatment is materially different from an election-based mix including Consideration Shares. Rolling Managers and the EBT could not be treated as a single class because the number of Consideration Shares available to the EBT depends on collective elections by Rolling Managers; that interdependence required separate classes. The court further concluded that Rolling Managers should be convened in three separate meetings corresponding to their holdings of B ordinary, C ordinary and Preference shares because those share types carry materially different rights affected by the Scheme, and there was no sufficient uniformity of holdings to justify combining them. The court declined to require administrative re-drafting to combine classes where the company would incur undue inconvenience or cost. On the convening of meetings, the court approved virtual meetings under paragraph 3 of Schedule 14 to the Corporate Insolvency and Governance Act 2020 and accepted the companys proposed Lumi-based arrangements to permit participation and written questions.

Practical disposition: The court ordered convening of the three Court meetings as requested (with a minor amendment to refer to the witness statement outlining the remote arrangements).

The application to convene court meetings was allowed. The court applied the Part 26 class-composition principles and ordered convening of three separate Court meetings of Rolling Managers (for B ordinary, C ordinary and Preference shares) in addition to a separate class for the Investor and separate classes (by consent) for the Exiting Managers and the EBT, because differences in existing rights and the Schemes elective allocation of consideration meant those groups could not consult together with a view to their common interest. The court also approved holding the meetings by remote means under paragraph 3 of Schedule 14 to the Corporate Insolvency and Governance Act 2020 and adopted the companys proposed remote-participation arrangements.