Codemasters Group Holdings Plc, Re

When sanctioning a scheme of arrangement, the court considers whether the statutory requirements have been met, whether the class was fairly represented without coercion, whether the scheme is one that a reasonable member of the class could approve, and whether any defect would make it unlawful or inoperative.

The court retains a general discretion. Contractual or commercial concerns affecting a small minority will not prevent sanction where the scheme preserves the relevant contractual rights and the overall arrangement remains fair.

Codemasters Group Holdings Plc applied for sanction of a scheme under section 899 of the Companies Act 2006. The scheme implemented the acquisition of the company by Codex Games Limited for cash consideration.

A single shareholders’ meeting had been convened by order of ICC Judge Burton. The scheme was approved by the required statutory majorities. No shareholder opposed the application, although former shareholders of Slightly Mad Studios raised concerns that the acquisition might affect contractual earn-out rights arising from the earlier sale of that company.

The central issues were whether the statutory and procedural requirements had been satisfied, whether the scheme was fair, and whether the earn-out concerns justified refusing sanction.

1. Application granted. The scheme was sanctioned.
2. The court adopted the four matters summarised in Re TDG Plc [2009] 1 BCLC 445: compliance with the statutory provisions; fair representation of the class and absence of coercion; whether the scheme was fair and could reasonably be approved by a member of the class acting in their own interests; and whether any blot made the scheme unlawful or inoperative.
3. The statutory requirements were satisfied. All shareholders received the same treatment, so a single meeting of the shareholders as one class was appropriate. The meeting was properly convened, the explanatory statement gave the required information, and the scheme was approved by the requisite majorities, substantially exceeding the statutory value threshold in section 899 of the Companies Act 2006.
4. The class was fairly represented. The turnout represented over 45 per cent by value, and there was no evidence that shareholders voting in favour acted other than bona fide or coerced those voting against.
5. The scheme was fair. It had been unanimously recommended by the directors, supported by financial advice, properly explained to shareholders, and approved by a strong majority.
6. The correspondence from former shareholders of Slightly Mad Studios did not justify refusal of sanction. The scheme did not alter the contractual earn-out arrangements. Although any future equity-based consideration would in practice be converted into cash at the scheme price, that price represented a significant premium and did not undermine the fairness of the scheme.
7. No blot or other defect rendering the scheme unlawful or inoperative was identified. The court therefore exercised its discretion to sanction the scheme.