Re West African Gas Pipeline Company

The Company sought permission under Part 26 of the Companies Act 2006 to convene a meeting of holders of its ordinary shares to consider a proposed scheme of arrangement under section 895. The proposed scheme would amend the shareholders' agreement and bye-laws to introduce an alternative approval mechanism (90% in favour with no votes against) where unanimity cannot be achieved because one shareholder (BenGaz) appears unable to exercise voting rights.

The court considered whether the proposal amounted to an arrangement within section 895, whether the members were correctly divided into classes, whether the explanatory statement complied with practice directions, and whether any jurisdictional obstacle arose from the company being Bermuda-incorporated. The court held that the proposal met the requirements to convene a meeting: it is an arrangement under section 895, a single class of shareholders is appropriate, and the explanatory statement is adequate. On jurisdiction, the court concluded that a sufficient connection with England existed (notably the shareholders' agreement being governed by English law and the existence of inter-conditional parallel proceedings in Bermuda) such that there was no bar to convening an English scheme meeting, with Re Drax and the rule in Antony Gibbs being relevant to that assessment.

The court declined to resolve at the convening stage the factual dispute over who is authorised to represent BenGaz, noting that fairness and representation issues are matters for the sanction hearing. The application to convene the meeting was allowed and directions for service and notification were given, with some minor changes to the proposed order.

Background and parties: The applicant, West African Gas Pipeline Company Limited (incorporated in Bermuda), applied for permission to convene a meeting of its ordinary shareholders under Part 26 of the Companies Act 2006 to approve a scheme of arrangement. There are six shareholders. One shareholder, Société BenGaz SA (BenGaz), holds 2% of the shares but, the Company says, no person currently has proper authority to exercise BenGaz's voting rights.

Nature of the application: The Company sought to amend the shareholders' agreement and constitutional documents by scheme to introduce an alternative procedure for certain corporate acts (including amendments to the memorandum, bye-laws and shareholders' agreement) permitting approval where shareholders holding 90% of votes present vote in favour and no shareholder votes against. The objective was to enable restructuring of funding and conversion of debt into non-voting preference shares, matters that presently require unanimity under the shareholders' agreement and cannot be achieved given BenGaz's current situation.

Issues framed:

• Whether the proposal amounts to a compromise or arrangement within the meaning of section 895 of the Companies Act 2006;
• Whether the convening of a single class meeting is appropriate;
• Whether the explanatory statement complies with practice directions and correctly explains the effect of the arrangement (including material interests of directors);
• Whether there is any jurisdictional impediment to the English court exercising jurisdiction to convene and sanction a scheme in respect of a Bermuda-incorporated company, particularly given that a parallel Bermudian scheme is proposed;
• How to deal at the convening stage with the factual dispute about who is authorised to represent BenGaz.

Court's reasoning: The court found that the proposed scheme involved the requisite give and take and therefore constituted an arrangement under section 895. There is a single class of ordinary shareholders and the proposed amendments affect their rights identically, so one class meeting is appropriate. The explanatory statement complies with the relevant practice direction requirements. On jurisdiction, the court followed the principle that it will not exercise jurisdiction absent a sufficient connection with England, but held that a sufficient connection existed here: the shareholders' agreement is governed by English law and under private international law there is a real doubt whether a Bermudian-only scheme would bind parties as against rights governed by English law (the judgment referenced Re Drax and the rule in Antony Gibbs). The fact that parallel, inter-conditional schemes are proposed in Bermuda and England reinforced the view that the English court could properly exercise jurisdiction. The factual dispute about BenGaz's representation could not be resolved at the convening stage and may be relevant at sanction, but should not prevent the convening of a meeting. The court was satisfied that additional notification steps proposed (including service on various potentially interested persons) were appropriate. Directions were given for convening the meeting and service of documents, and the court ordered the proposed directions with minor modifications.

The application for permission to convene the members' meeting to consider the proposed scheme of arrangement is granted. The court held that the proposal is an arrangement within section 895, that a single class meeting is appropriate, that the explanatory statement is adequate, and that there is no jurisdictional roadblock to convening an English scheme meeting given the English-law connection and inter-conditional parallel Bermudian scheme. The factual dispute over BenGaz's authorised representative was not resolved at this stage and is left for the sanction hearing if necessary. The court made the requested directions with minor amendments.