Introduction

Recently, in Re SABmiller plc [2016] EWHC (Ch) 23, the English court faced challenges on its jurisdiction to summon shareholders for a meeting to the exclusion of several shareholders who have waived their right to participate in the meeting.

Background

SABMiller Plc (the “Company”) applied for an order summoning a single meeting of all of the holders of its ordinary shares except Altria Group Inc. (“Altria”) and BEVCO Ltd. (“BEVCO”), for the purpose of considering a scheme of arrangement (the “Scheme”).  Altria and BEVCO are the two largest shareholders of the Company. The Company asked the Court to treat Altria and BEVCO as a separate class of members and Altria and BEVCO would undertake to be bound by the Scheme, but this faced objection from a group of minority shareholders, Soroban Master Fund LP and Soroban Opportunities Master Fund LP (collectively, “Soroban”).

The Law

Section 896 of the Companies Act 2006 (equivalent to section 670 of the Companies Ordinances (Cap 622, the laws of Hong Kong)) (the “Act”) stipulates that the court may order a meeting of the creditors/members or class of creditors/members to be summoned in such manner as the court directs. Further, pursuant to section 899 of the Act, the court may sanction the compromise/arrangement if 75% of the members present and voting at a meeting under section 896 agree with the compromise/arrangement.

Soroban’s Argument

Soroban argues that if the rights of the persons to be bound by the scheme are not sufficiently dissimilar that they cannot consult together with a view to their common interest, they must be summoned to a single class meeting. Here, there is no distinction in rights and treatment between Altria and BEVCO and the other ordinary shareholders to justify two separate classes being constituted and hence the court has no jurisdiction to summon a meeting of the shareholders that does not also include Altria and BEVCO.

In fact, Soroban is supportive of the Scheme. It objects to separate meetings because if Altria and BEVCO as the majority shareholders who support the Scheme attend the single meeting, there is much higher chance of any dissentient members would be outvoted.

Court’s Ruling

The Court held that even if a particular member is included in a particular class for a scheme meeting, the court cannot compel him/her to attend and vote. There is nothing in the statutory wording to suggest that a member cannot voluntarily agree to waive or forgo that right to participate in the meeting, in the same way as the member can simply decide not to attend or vote.  Further, the purpose of the court’s jurisdiction under section 899 is to facilitate compromises/arrangements when the company cannot obtain the consent of all members and hence the provisions must be construed so as to prevent it being used so as to result in confiscation and injustice.

In the case, Altria and BEVCO were not acting under compulsion, and willingly gave consent voluntarily by agreeing to give an undertaking to be bound by the Scheme. Their right/property was not confiscated and there was no injustice to them even they are not summoned to the meeting. There was also no injustice to the other members as they had no rights to force Altria and BEVCO to attend and vote in the first place. Therefore, the Court held that it does have jurisdiction to order shareholders’ meeting to be summoned without Altria and BEVCO.

Conclusion

The case shows how the English Court deals with the question by focusing on the voluntariness of the shareholders in waiving their rights, instead of dealing with the dissimilarity/similarity of the shareholders’ rights. It also shows the flexible approach of the Court in interpreting the relevant sections in relation to compromises/arrangements to give light to its legislative intention.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2016