IN THE MATTER OF THE FRENCH CONNECTION GROUP PLC

The court sanctioned a members' scheme of arrangement under Part 26 of the Companies Act 2006 for the takeover of The French Connection Group plc by MIP Holdings Limited (Bidco). The judge found that the statutory requirements, including the explanatory statement requirement in section 897 and the approval thresholds in section 899(1), had been met. The scheme shareholders formed a single class, the required majorities were obtained at the convened meeting, and the shareholders were fairly represented despite relatively low headcount turnout. The directors unanimously recommended the scheme, the financial advisers advised that the offer was fair and reasonable, and Bidco gave an undertaking to be bound. No technical or legal "blot" was identified and the scheme was therefore sanctioned.

This was a first instance hearing to sanction a members' scheme of arrangement under Part 26 of the Companies Act 2006. The proposal was a takeover by MIP Holdings Limited of the scheme shares in The French Connection Group plc, with excluded shares held by Mr Apinder Singh Ghura and associates. The scheme shares represented approximately 74.6% of issued shares and the consideration offered was 30p per scheme share, to be paid in cash.

The convening order was made by Chief Insolvency and Companies Court Judge Briggs directing a single meeting of scheme shareholders. Evidence included the chairman's report (Mr Neil Williams) showing that, of those voting in person or by proxy, shareholders holding 99.84% of the scheme shares voted in favour, satisfying the statutory 75% by value threshold under section 899(1). Directors unanimously recommended the scheme and irrevocable undertakings corresponding to about 43.6% of issued ordinary shares were given by certain shareholders including a director.

The court framed the issues as: (i) compliance with the Part 26 statutory requirements (including section 897 and section 899(1)); (ii) whether the scheme shareholders formed a single class and were fairly represented; (iii) whether the scheme was one which an intelligent and honest person might reasonably approve; and (iv) whether there was any "blot" or technical/legal defect. The judge addressed each issue, finding the single class test satisfied, the statutory majorities obtained, adequate notice and voting processes followed, the majority acted bona fide for proper purposes, and the commercial rationale and directors' unanimous recommendation (supported by financial advice) made the scheme one that a reasonable shareholder might approve. No blot was identified. On that basis, and on receipt of Bidco's undertaking to be bound, the court sanctioned the scheme.

The scheme is sanctioned. The court concluded that the statutory criteria under Part 26 (including the requirements of section 897 and the voting thresholds of section 899(1)) were satisfied, the scheme shareholders formed a single class and were fairly represented, the scheme was one an intelligent and honest person might reasonably approve, and no technical or legal defect ('blot') was identified. Upon Bidco's undertaking to be bound, sanction was granted.