Lightsource BP Renewable Energy Investments Holdings Ltd (Re The Companies Act 2006)

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements have been met, the relevant class has been fairly represented, an intelligent and honest member of the class could reasonably approve the scheme, and there is no blot on it.

For a reduction of capital, the court must also be satisfied that the special resolution is valid, shareholders are treated equitably, the proposals have been properly explained, the reduction serves a discernible purpose, and creditors are not prejudiced. Unequal treatment may be permissible where it reflects class rights, has been consented to, or causes no prejudice.

The applicant company sought sanction of a scheme of arrangement under Part 26 of the Companies Act 2006. The scheme implemented the demerger of certain US assets as part of BP’s proposed acquisition of shares held by the company’s other members. The court had previously permitted the company to convene a meeting of the relevant shareholder class.

The scheme was approved unanimously at the meeting. The company then sought confirmation of an associated reduction of capital. The central issues were whether the statutory and discretionary requirements for sanctioning the scheme were satisfied and whether the requirements for confirming the reduction of capital were met.

1. The scheme was sanctioned and the associated reduction of capital was confirmed. The court was satisfied that all necessary formalities had been met and that there was no commercial or legal reason to refuse the orders.

2. For sanction of a scheme, the court applied the four conditions identified in Re TDG plc [2009] 1 BCLC 445: statutory compliance; fair representation of the relevant class and bona fide voting without coercion; reasonable approval by an intelligent and honest member acting in their own interest; and absence of a blot on the scheme.

3. The statutory requirements were satisfied. The scheme document and explanatory statement complied with s 897 of the Companies Act 2006, notice had been given, and the participating shareholders had approved the scheme with substantial support. An inadvertent failure to give one shareholder the requisite notice did not invalidate the meeting.

4. The scheme was commercially rational and could reasonably be approved by an intelligent and honest participating shareholder. The court’s concerns about delay, drafting, company-law compliance and possible Delaware-law issues were adequately addressed. The order was amended to make clear that the transaction steps were to comply with applicable law.

5. The jurisdiction to confirm the reduction of capital arose under sections 641 onwards of the Companies Act 2006. Applying Re Ratners Group Plc [1988] BCLC 685 and Re Thorn EMI Plc [1989] BCLC 613, the court required a valid special resolution, equitable treatment of shareholders, proper explanation of the proposals, a discernible purpose, and absence of prejudice to creditors.

6. Shareholders need not be treated identically. Unequal treatment may be justified by class rights, proper consent, or absence of prejudice. Those requirements were satisfied because the reduction affected the bonus-share holders uniformly and BP consented.

7. The reduction had a clear and essential purpose in effecting the demerger and facilitating BP’s acquisition. Creditors were not prejudiced because the company had none, and newspaper advertisement provided a safeguard against unknown creditors.

8. The court accepted the earlier finding that the principle in Re Rylands-Whitecross Limited (21 December 2023, unreported) did not apply, because the facts did not involve a scheme confirming a reduction of capital for a transaction capable of being carried out without court intervention. The court also applied Re TIP-Europe Limited [1988] BCLC 231 in recognising that confirmation of the reduction could not occur before completion of Part I of the scheme.

This was a first-instance application. Edwin Johnson J had previously permitted the company to convene the relevant class meeting. Mr Justice Thompsell subsequently sanctioned the scheme and confirmed the reduction of capital.