McCarthy & Stone Plc, Re

When sanctioning a scheme of arrangement, the court must exercise its own discretion. It must consider whether the statutory requirements have been met, whether the meeting fairly represented the relevant class, whether an intelligent and honest member of that class might reasonably approve the scheme, and whether the scheme contains any blots.

The court is not a rubber stamp for the majority. However, where those matters are established, it should be slow to differ from the majority’s view, particularly on the commercial judgment involved in approval.

McCarthy & Stone Plc applied under Companies Act 2006, Part 26, for sanction of a scheme under which its entire issued and to-be-issued share capital would be acquired by Mastiff Bidco Limited for cash.

The court meeting was properly convened. The scheme was approved by the statutory majority, representing 85.65 per cent in value of those voting. The court considered whether the statutory and discretionary requirements for sanction were satisfied.

1. The court sanctioned the scheme of arrangement.
2. Applying the principles summarised in Re TDG Plc [2009] 1 BCLC 445 at [29]-[30], the court considered four matters: whether the statutory requirements had been complied with; whether the meeting fairly represented the relevant class; whether an intelligent and honest member of that class, acting in their own interests, might reasonably approve the scheme; and whether there were any blots on it.
3. The requirements of Part 26 of the Companies Act 2006 were satisfied. The meeting had been duly convened, the explanatory statement had been properly sent, and the scheme had received the requisite statutory majority.
4. The class was fairly represented. There was no evidence that the majority had acted other than bona fide or had coerced the minority. The strong majority and relatively high turnout supported that conclusion.
5. The scheme was one which an intelligent and honest member of the class might reasonably approve. Relevant factors included the unanimous recommendation of the directors, professional financial advice, proper explanation of the scheme, the strong majority, and the absence of opposition at the sanction hearing.
6. The court had found no blots on the scheme. Irrevocable undertakings given by directors and shareholders did not create a class issue because the persons giving them received no additional consideration.
7. The court does not act as a rubber stamp for the majority. Nevertheless, once the relevant matters are established, it should show reluctance, and be slow, to differ from the majority’s view on matters such as what an intelligent and honest person might reasonably think.