Loungers PLC, Re

When sanctioning a scheme of arrangement, the court must be satisfied that the statutory requirements have been met, that the class was fairly represented and acted bona fide, that an intelligent and honest member of the class might reasonably approve the scheme, and that the scheme contains no blot.

A technical defect in the directions for convening a meeting may be waived where it has caused no material prejudice and the meeting was otherwise properly conducted. Irrevocable undertakings do not create a class issue where they provide no additional consideration to the shareholders giving them.

Loungers plc applied for sanction of a modified scheme of arrangement under Part 26 of the Companies Act 2006. The scheme was intended to enable CF Exedra Bidco Limited to acquire the Company’s issued and to be issued share capital for cash, with a rollover alternative.

The scheme meeting had been directed to take place in London but was held at the Company’s headquarters in Bristol. The scheme was approved by the requisite majorities. The issues were whether the meeting defect should be waived and whether the statutory and discretionary requirements for sanction were satisfied.

1. Scheme sanctioned. The court sanctioned the modified scheme under Part 26 of the Companies Act 2006.

2. The court applied the four matters identified in Re TDG plc [2009] 1 BCLC 445: compliance with the statutory provisions; fair representation of the class and bona fide conduct by the statutory majority; whether an intelligent and honest member of the class might reasonably approve the scheme; and whether there was any blot on the scheme.

3. Those requirements were satisfied. The meeting was properly convened and conducted in substance, the explanatory material complied with Part 26, the statutory majority approved the scheme, the class was fairly represented, and there was no evidence of coercion or adverse interests. The directors’ unanimous recommendation, financial advice, full explanation, shareholder approval and substantial premium supported the conclusion that the scheme might reasonably be approved by an intelligent and honest shareholder.

4. The court waived the technical defect concerning the place of the meeting. The meeting had been held in accordance with the substantive directions, the scheme had been approved on a representative turnout, and the defect caused no material difficulty.

5. Following the approach in Re Equitable Life Assurance Society (No.1) [2002] BCC 319 and Re Cardtronics plc [2021] EWHC, shareholders who voted both for and against were treated as members in favour and against for the majority-in-number calculation.

6. Irrevocable undertakings given by directors and other shareholders did not create a class issue because those shareholders received no additional consideration: Re Telewest Communications plc (No.1) [2004] EWHC 924 (Ch).