IN THE MATTER OF THE FRENCH CONNECTION GROUP PLC

In sanctioning a takeover scheme, the court must be satisfied that the statutory requirements and procedural safeguards have been met. The relevant class must be properly constituted and fairly represented. The statutory majority must have approved the scheme, and the voting majority must have acted bona fide for proper purposes. The court must also conclude that an intelligent and honest person, acting in their own interests, might reasonably approve the scheme. Finally, the scheme must contain no technical or legal defect, or blot. Where those requirements are satisfied and the bidder undertakes to be bound, the court may sanction the scheme.

The Company sought sanction of a members’ scheme of arrangement under Part 26 of the Companies Act 2006. The scheme provided for the acquisition by Bidco of the shares not already held by Mr Apinder Singh Ghura and associated persons. A convening order had directed a single meeting of the scheme shareholders.

The court considered whether the statutory requirements had been fulfilled, whether the shareholders formed a proper class and were fairly represented, whether the scheme was one which an intelligent and honest person might reasonably approve, and whether there was any blot on the scheme.

1. The scheme was sanctioned. The court was satisfied that the statutory and procedural requirements had been met and that Bidco had undertaken to be bound by the scheme.

2. The scheme shareholders properly constituted one class. They had the same rights before the scheme and would be treated alike under it. The existence of irrevocable voting undertakings did not prevent them from consulting together in pursuit of their common interest, applying the approach described in Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 583.

3. The meeting had been properly convened, the explanatory statement complied with section 897 of the Companies Act 2006, and the statutory majorities required by section 899(1) had been obtained. The majority in number voted in favour and represented substantially more than 75 per cent by value of the scheme shares.

4. The shareholders had been fairly represented. The relatively low headcount turnout did not indicate that a substantial body of opposing shareholders had failed to vote, particularly given the level of participation by shares. The voting majority had acted bona fide and for proper purposes.

5. The scheme was one which an intelligent and honest person, acting in respect of their interests, might reasonably approve. The directors’ unanimous recommendation, financial advice, the fairness of the offer and the absence of objections supported that conclusion.

6. No blot had been identified. A blot ordinarily consists of a technical or legal defect, such as an internal inconsistency or infringement of a mandatory legal provision. The court adopted the sanctioning framework derived from Re Telewest Communications plc (No.2) [2005] 1 BCLC 772 at 20–22 and Re TDG plc [2009] 1 BCLC 445 at 30.

This was a first-instance sanction hearing. The judgment records that Chief Insolvency and Companies Court Judge Briggs made a convening order on 8 October 2021 directing a single meeting of the scheme shareholders.