In the Matter of the Royal London Mutual Insurance Society Limited

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements are met, the relevant class has been fairly represented, the statutory majority has acted bona fide without coercion, an intelligent and honest member of the class might reasonably approve the scheme, and there is no blot on it. The court does not merely register the meeting’s decision, although it will ordinarily give substantial weight to an informed and properly conducted vote. A proposed amendment to an existing insurance business transfer scheme requires construction of the amendment mechanism in its statutory context. The court should consider whether the amendment has a clear commercial purpose and whether it materially adversely affects policyholders’ security or reasonable expectations, giving significant weight to the independent actuary’s certificate.

Royal London applied for sanction of a scheme of arrangement under Companies Act 2006, Part 26, concerning eligible policyholders of its closed Liver sub-fund. The scheme had been approved at the court-convened meeting by substantial majorities.

Royal London Insurance DAC separately applied for consent to amendments to an existing Part VII insurance business transfer scheme. The amendments were consequential upon the proposed scheme and were sought under the amendment provision in that transfer scheme. The court considered statutory compliance, class representation, fairness, the absence of a blot, jurisdiction to consent to the amendments, and their effect on policyholders.

1. Scheme of arrangement. The proposal constituted a compromise or arrangement under section 895 of the Companies Act 2006 because policyholders received identified uplifts in return for contributing part of the closed fund estate. The class had been correctly constituted at the convening stage, and there had been no material development requiring reconsideration.
2. The statutory requirements were satisfied. Notice and advertisement directions had been complied with; the explanatory booklet complied with section 897; and the majorities required by section 899(1), (3) and (4) had been achieved. The meeting was fairly representative. The voting evidence disclosed no coercion or bad faith, and differences between policyholder cohorts were not material.
3. The scheme was one which an intelligent and honest member of the class, acting in their own interest, might reasonably approve. The court gave weight to the substantial majority, the full engagement process, and the independent actuary’s evidence that the scheme was objectively fair and would not materially adversely affect guaranteed benefits or policyholder outcomes.
4. There was no blot. A blot generally concerns a technical or legal defect, such as an internal inconsistency or infringement of a mandatory provision. No such defect was identified in the scheme or ancillary documentation. The scheme was sanctioned.
5. Amendment application. The court’s jurisdiction arose from the amendment clause in the existing Part VII scheme and the liberty to apply in the original sanction order. The appropriate approach depended on the construction of that clause in its statutory context. It was appropriate to consider whether the amendment had a clear commercial purpose or real point, viewed from the perspective of both the applicant and affected policyholders.
6. The amendments were consequential upon the scheme and had a clear commercial purpose. The independent actuary’s certificate, supported by his report, provided compelling evidence that the amendments would not materially adversely affect policyholders’ security or reasonable expectations. Consent to the amendments was therefore granted.

This was a first-instance sanction hearing. The court referred to its earlier convening judgment, [2022] EWHC 1673 (Ch), and to the original Part VII sanction order made on 5 February 2019.