Almida Group Unlimted & Ors, Re

At a sanction hearing for a scheme of arrangement under Part 26 of the Companies Act 2006, the court must be satisfied that it has jurisdiction, that the convening order has been complied with, that the statutory majority approved the scheme, that the scheme is fair, and that it is effective and workable. The amalgamation jurisdiction under section 900 cannot transfer rights or property requiring counterparty consent unless the necessary novations or consents have been obtained. A scheme designed to eliminate dormant legacy companies may be sanctioned where stakeholder interests, including creditors’ interests, are preserved and the scheme produces no improper tax benefit.

Eleven English legacy companies within the Schlumberger group applied for sanction of schemes under Part 26 of the Companies Act 2006, using the amalgamation provisions in section 900. The schemes transferred assets and liabilities to Schlumberger UK Holdings Limited in exchange for shares which were unlikely to be taken up, followed by automatic dissolution of the scheme companies.

At the convening hearing, Edwin Johnson J directed single-class meetings after finding that the applicants were companies, that their proposals were compromises or arrangements, and that they constituted reconstructions or amalgamations under section 900(1)(a). The sanction hearing concerned jurisdiction, compliance with the convening orders, voting, fairness, and whether any defect made the schemes ineffective or unworkable.

1. The court sanctioned all eleven schemes. The proposed consolidation was commercially desirable and an intelligent and honest scheme member could reasonably approve it. The arrangements preserved the position of stakeholders, including creditors.

2. The jurisdiction under section 900 was available only if the principle in Noakes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 was respected. Rights or property which could be transferred only with a counterparty’s consent could not be transferred by the amalgamation mechanism alone. The applicants had undertaken sufficient due diligence, novated contracts or obtained the necessary consents, and therefore no jurisdictional obstacle remained.

3. The convening orders had been complied with. Each scheme company had a single member, with full attendance and unanimous approval, so the voting requirements were satisfied.

4. The schemes were effective and workable. Companies without apparent assets would receive £1,000 loans so that assets existed to transfer. Holdings assumed direct responsibility under a deed poll for liabilities arising on or after the effective date, avoiding the need for creditors to restore a dissolved company to the register.

5. The principle stated in Re Rylands-Whitecross Limited (1973, unreported), that amalgamation provisions could not be used to avoid an obvious tax liability, was not engaged. The evidence showed that the schemes produced no tax benefit and were undertaken solely to eliminate companies with no commercial purpose.

6. The relief fell within section 900(2), and the court ordered the relief sought.