Key Facts
- •Velocys plc ('the Company') applied to convene a meeting of its Ordinary Share holders to approve a scheme of arrangement ('the Scheme') for acquisition by Madison Bidco Limited ('Bidco').
- •An 8.3% stake in Velocys is indirectly held by Mr. David Davidovich, a UK assets freeze target under The Russia (Sanctions) (EU Exit) Regulations 2019.
- •Sanctions regulations prevent Mr. Davidovich from dealing with his shares, impacting voting and share transfer under the Scheme.
- •The Company proposed solutions: a Court Order allowing the chair to disallow unlawful votes and a licence application to HM Treasury's Office of Financial Sanctions Implementation (OFSI) to handle Mr. Davidovich's shares.
- •The Scheme's terms stipulate that Mr. Davidovich's shares will only be transferred once lawful.
Legal Principles
The Court's role at the convening stage is limited to identifying jurisdictional roadblocks preventing Scheme sanction.
This judgment
Class composition in scheme of arrangements is determined by members' rights, not interests. Creditors fall within the same class if their rights are not so dissimilar as to prevent consultation for common interest.
Sovereign Life Assurance Co v Dodd [1892] 2 QB 573
At the sanction stage, the Court must be satisfied the class was fairly represented, acted bona fide, and the Scheme is one an intelligent and honest person might reasonably approve.
Re TDG plc [2009] 1 BCLC 445
In determining class composition, the entry and exit points for shareholders are the correct points of comparison.
Re Hawk Insurance Co Limited [2001] 2 BCLC 48
Regulation 11 of The Russia (Sanctions) (EU Exit) Regulations 2019 prohibits dealing with funds or economic resources owned, held or controlled by a designated person.
The Russia (Sanctions) (EU Exit) Regulations 2019
Outcomes
The Court granted the convening order for a single meeting of Scheme Shareholders.
The proposed solutions adequately address the potential illegality arising from sanctions on Mr. Davidovich's shares. The Court found no insurmountable roadblock to sanctioning the scheme and that Mr. Davidovich's situation didn't necessitate separate class meetings.