IN THE MATTER OF CHARLES STANLEY GROUP PLC

In sanctioning a scheme of arrangement under Companies Act 2006, the court must exercise an independent discretion. It should sanction the scheme where the statutory requirements have been met, the relevant class was fairly represented, the statutory majority acted bona fide and for proper purposes, an intelligent and honest member of the class might reasonably approve the scheme, and no legal or technical defect affects it.

Shareholders with similar rights remain in the same class despite differing commercial interests. A low voting turnout does not, by itself, justify refusal of sanction. The court should be slow to differ from an informed commercial decision of the meeting, while retaining responsibility to identify material procedural defects or a blot on the scheme.

Charles Stanley Group plc applied for the court’s sanction of a takeover scheme of arrangement under Part 26 of the Companies Act 2006. Raymond James UK Wealth Management Holdings Ltd was to acquire the company for 515 pence per scheme share.

The scheme had been approved at a court meeting by the requisite statutory majorities. The court considered class composition, departures from the directions order concerning communications, the relatively low headcount turnout, irrevocable voting undertakings, the treatment of historic bearer shares, and whether any blot or other reason justified refusing sanction.

1. Class composition. The scheme shareholders properly constituted a single class because they held the same rights going into the scheme and were treated alike. Differences in private or commercial interests did not affect class composition. The court considered the scheme together with related arrangements where necessary to assess the rights affected.
2. Sanction jurisdiction. The court’s discretion under sections 895 to 899 of the Companies Act 2006 is not a formality. The relevant questions were: whether the statutory requirements were met; whether the class was fairly represented and the majority acted bona fide and for proper purposes; whether an intelligent and honest member acting in their own interests might reasonably approve the scheme; and whether there was a blot or other defect.
3. The statutory requirements were satisfied. The meeting had been properly convened, the explanatory material complied with the Act, and the statutory majorities under section 899(1) were obtained. Minor departures from the directions order concerning communications were immaterial in the circumstances and did not prejudice the outcome.
4. The class was fairly represented. The low headcount turnout was not decisive, particularly given modern nominee holdings, the substantial value turnout, the absence of evidence of opposition suppressed by defective communications, and the fact that the statutory majorities would have remained substantial even if irrevocable-undertaking votes were excluded.
5. The scheme was one which an intelligent and honest member of the class might reasonably approve. The board’s unanimous recommendation, financial advice, substantial premium and extensive disclosure supported that conclusion. No technical or legal defect, including any blot on the scheme, was identified.
6. The court was satisfied that the scheme was a scheme of arrangement within the meaning of the Act and sanctioned it in the form of the draft order.