Ten Entertainment Group PLC, Re
[2024] EWHC 946 (Ch)
Lakes Distillery Company Plc, Re
20 June 2024
[2024] EWHC 1535 (Ch)
High Court
A company was bought for £46 million. Some directors had secret deals that gave them extra money if the deal went through. The judge said the paperwork about the deal wasn't clear enough, but because most people still agreed to the sale and it was a really important deal for the company, he allowed the sale to happen anyway. The judge emphasized the need for clear paperwork in future deals like this.
Key Facts
- •The Lakes Distillery Company PLC (the Company) sought court sanction for a £46.1 million takeover scheme of arrangement under Part 26 of the Companies Act 2006.
- •Nyetimber Wines and Spirits Group Ltd (Bidco) was the acquiring company.
- •Scheme Shareholders would receive £1.16 in cash per share.
- •The scheme involved 284 shareholders and 3,931 Crowdcube investors.
- •The scheme was subject to the City Code on Takeovers and Mergers.
- •The Court Meeting approved the scheme with 91.02% by value and 83.43% by number.
- •A key issue concerned the directors' interests in Convertible Loan Notes (CLNs) with a 100% premium on change of control.
- •The court adjourned the hearing to address concerns about the sufficiency and accuracy of disclosure of directors' interests in the Explanatory Statement regarding the CLNs.
Legal Principles
A scheme under Part 26 of the Companies Act 2006 must involve a compromise or arrangement with an element of 'give and take' between the company and its members.
Re Jelf Group Plc [2015] EWHC 3857(Ch) and Re SAB Miller plc (sanction hearing) [2016] EWHC 2670 (Ch)
The court must consider whether the scheme's class composition is properly constituted, taking into account collateral arrangements.
Re PA Consulting Group Ltd [2021] EWHC 29 (Ch) and Re Baltic Exchange Limited [2016] EWHC 3391 (Ch)
The Explanatory Statement must disclose any material interests of the directors and the effects of the scheme on those interests.
Companies Act 2006, section 897(2) and (3)
At the sanction stage, the court considers: (1) statutory compliance; (2) fair representation of the class; (3) reasonableness of the arrangement; and (4) absence of any 'blot' on the scheme.
Buckley on the Companies Acts at [219]-[232], TDG Plc [2009] 1 BCLC 445
Outcomes
The court sanctioned the scheme.
The court found that the jurisdictional requirements were met, despite concerns about disclosure regarding the CLNs. The court determined that while disclosure was deficient, a further meeting was unnecessary given the strong initial vote and the dire consequences for the company should the scheme fail.
The court addressed concerns about the directors' interests in CLNs and their disclosure.
The court concluded that the CLNs were not part of the scheme, and while disclosure was deficient, it was not so significant as to warrant a further meeting. The court interpreted the CLNs to include the 100% premium upon change of control.