Jersey Unreported Judgments

[2011]JRC125

Royal Court

(Samedi)

27 June 2011

Before     :

Sir Phillip Bailhache, Kt., Commissioner, and Jurats Clapham and Milner.

 

IN THE MATTER OF REPRESENTATION OF VALLAR PLC

AND IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLES 63 AND 125 OF THE COMPANIES (JERSEY) LAW 1991

Advocate B. H. Lacey for the Representor.

judgment

the commissioner:

1.        This is a renewed application by Vallar Plc ("the Company") for approval of a scheme of arrangement under Article 125 of the Companies (Jersey) Law 1991 (the "1991 Law") and a related application for approval of a reduction in the Company's capital pursuant to Article 63 of the 1991 Law.  At a hearing on the 7^th March, 2011, the Court made certain procedural orders and fixed the date for the requisite meeting of shareholders ("the Court meeting").  This hearing was originally due to take place on 6^th May, 2011, but that date had to be vacated because an accounting issue had arisen resulting in an inability to finalise the Company's prospectus. 

2.        The Court gave a short judgment on 7^th March, 2011, ("the March judgment") ([2011] JRC 051) and this judgment should be regarded as supplemental to it.  We do not propose to repeat in any detail what was said in the March judgment as to the purpose of these applications; in a nutshell they aim to achieve, through an English company, Bumi Plc, a listing of the Company's shares on the FTSE 100 Share Index on the London Stock Exchange. 

3.        The statutory framework for the proposed scheme is set out at Article 125 of the 1991 Law which provides, so far as is material, at paragraphs 1 and 2 of the Article:-

"(1)     Where a compromise or arrangement is proposed between a company and its creditors, or a class of them, or between the company and its members, or a class of them, the court may on the application of the company or a creditor or member of it or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members (as the case may be), to be called in a manner as the court directs. 

(2)         If a majority in number representing -

a.        3/4ths in value of the creditors or class of creditors; or

b.        3/4ths of the voting rights of the members or class of members,

as the case may be, present and voting either in person or by proxy at the meeting, agree to a compromise or arrangement, the compromise or arrangement, if sanctioned by the court, is binding on -

(i)        all creditors or the class of creditors; or

(ii)       all the members or class of members,

as the case may be and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company". 

4.        In the context of an application of this kind there are four stages in the process:-

(i)        There is an application under Article 125(1) for an order that a meeting of shareholders be called.  That stage has been passed.  As we have stated an order was made on 7^th March, 2011, for the Court meeting to take place. 

(ii)       The scheme proposals must be put to the Court-convened meeting and approved by a majority by number representing 3/4 of the voting rights of members present and voting in person or by proxy.  That stage has also been passed.  The Court has the affidavit of Sir Julian Horn-Smith showing that the Court meeting was convened in accordance with the Court's directions and that a resolution approving the scheme was passed by the necessary statutory majority.  Sir John's report shows that 24 shareholders holding 121,346,276 shares, 77.09% of the issued shares, voted in favour and that no shareholders voted against.  We are satisfied from an affidavit sworn by Lord Renwick and from the submissions of counsel that the scheme circular was in proper form and was despatched to all the shareholders in the Company who had been given proper notice of the Court meeting. 

(iii)      The Court must exercise its discretion as to whether to sanction the arrangement. 

(iv)      The fourth stage is to consider the application to sanction the reduction of capital. 

To those last two stages we now turn. 

5.        In exercising its discretion under Article 125 the Court has followed the settled approach of English courts.  We have to ask ourselves:-

(i)        Whether the provisions of the 1991 Law have been faithfully observed;

(ii)       Whether the shareholders or class of shareholders or creditors have been fairly represented by those who attended the meeting and that the statutory majority approving the scheme was acting in good faith in the interests of the class it professed to represent and was not coercing the minority in order to promote interests adverse to those of the class whom they purported to represent;

(iii)      Whether the arrangement was such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest might reasonably approve; and

(iv)      Whether viewing matters in the round there was no blot on the scheme which might indicate that the Court's discretion should not be exercised in favour of sanctioning the scheme of arrangement. 

6.        We record that we are satisfied from all the material placed before us and from the submissions of counsel that all these questions can fairly be answered in the affirmative.  It is true that the number of shareholders attending the Court meeting constituted only some 25% of those entitled to attend and vote but shareholder apathy is not uncommon.  None of those absent shareholders has expressed any reservations about the proposed scheme of arrangement and we are accordingly entitled to assume that there are none.  The scheme will affect all shareholders equally.  In any event it is not for the Court to strain to find reasons why a scheme of arrangement should not be sanctioned.  As Mr Justice Morgan stated in Re TDG plc [2009] 1 BCLC 445, at paragraph 30:-

"The court should show reluctance to differ from the views of the majority and should certainly be slow to differ from the majority on matters such as what an intelligent, honest person might reasonably think". 

7.        In the exercise of our discretion we find that the scheme of arrangement is one that we can properly approve and endorse. 

8.        We turn to the fourth stage which is whether the reduction of capital should be approved.  The principles governing such applications are well established.  There are three conditions to be satisfied:-

(i)        That the reduction is for a discernable purpose;

(ii)       That the shareholders are treated equitably; and

(iii)      That the creditors are not prejudiced. 

All these conditions are satisfied. 

9.        There is one further matter with which we should deal.  One of the Company's shareholders, Mr Steven Shapiro, a director of the Company, has an address in the USA.  We have received an affidavit sworn by Sarah Murphy, a partner in Freshfields Bruckhaus Deringer LLP and an attorney admitted to practice in the State of New York.  She is an experienced attorney regularly advising companies on issues under US Federal Securities Laws.  The proposed exchange of shares in the Company for shares in Bumi Plc would ordinarily be prohibited under the US Securities Act 1933 unless such issuance complied with the registration requirements of the 1933 Act or was exempted from such requirements.  Section 3(a)(10) of the 1933 Act provides such an exemption and the opinion of Ms Murphy is that Bumi Plc is entitled to rely upon that exemption for all the reasons set out in her affidavit.  It is obviously not a matter for us to make any finding in that respect but we do record that on the face of it the relevant conditions appear to have been met. 

10.      We accordingly grant the prayer of the representation and will make an order in the terms of the draft placed before us by counsel subject to minor modifications considered in oral submissions. 

Authorities

Companies (Jersey) law 1991.

Re TDG plc [2009] 1 BCLC 445.

US Securities Act 1933.