Allergan Plc v The Companies Act 2014

• Jurisdiction: Ireland
• Judge: Mr Justice David Barniville
• Judgment Date: 11 May 2020
• Neutral Citation: [2020] IEHC 214
• Docket Number: Record No. 2020/100 COS
• Court: High Court
• Date: 11 May 2020

IN THE MATTER OF ALLERGAN PLC AND IN THE MATTER OF THE COMPANIES ACT 2014

AND IN THE MATTER OF A PROPOSAL FOR A SCHEME OF ARRANGMENT PURSUANT TO PART 9, CHAPTER 1 OF THE COMPANIES ACT 2014

AND IN THE MATTER OF THE IRISH TAKEPOVER PANEL ACT 1887

[2020] IEHC 214

David Barniville J.

Record No. 2020/100 COS

THE HIGH COURT

COMMERCIAL

Schemes of arrangement – Sanction – Special resolution – Applicant seeking the sanctioning of a proposed scheme of arrangement – Whether the requirements for such sanction had been fulfilled by the applicant

Facts: The applicant, Allergan plc (the Company), applied to the High Court seeking orders pursuant to the Companies Act 2014 for: (a) the sanctioning of a proposed scheme of arrangement between it and holders of certain shares in the Company (the scheme) under Part 9, Chapter 1 of the 2014 Act; and (b) confirming a special resolution approving a reduction of the capital of the Company by cancelling and extinguishing certain of its shares under s. 85(1). Barniville J heard the Company’s application on 6 May 2020 and in an ex tempore ruling that day, made orders sanctioning the proposed scheme and confirming the special resolution approving the reduction in the Company’s capital as well as various ancillary orders. He was satisfied that it was appropriate to do so in light of the relevant legal tests as applied to the facts set out in the various affidavits sworn in support of the application. However, as the application raised an issue which, while present in a number of previous similar applications, had not yet been the subject of a written judgment of the Irish courts, he agreed to produce a written judgment addressing the issue and setting out his reasons for granting the Company’s application.The issue arose from the fact that more than 99% of the shares the subject of the scheme were held by investors in book entry form through the Depository Trust Corporation (DTC) in the United States, whose nominee, Cede & Co (Cede), was the registered holder and legal owner of the relevant shares. Those investors were beneficial owners and not legal owners of these shares. The balance of the shares (less than 1%) were held by persons other than Cede. Those persons were the registered and legal owners of the shares. Cede cast votes at the scheme meeting convened by the court in favour of and against the proposed scheme, to reflect the instructions given to the DTC by the beneficial owners of the relevant shares. This raised a number of questions in terms of the test applicable to the sanctioning by the court of schemes of arrangement.

Held by Barniville J that all of the five requirements summarised by Kelly J in Re Colonia Insurance (Ireland) Ltd [2005] 1 IR 497 and applied and considered in the other cases, had been fulfilled by the Company. Barniville J held that the Company satisfactorily addressed the six factors set out by Barrett J in Re Permanent TSB Group Holdings plc [2015] IEHC 500 and established that the requirements of s. 85(2) had been complied with. Barniville J was also satisfied on the evidence that the proposed reduction of capital did not involve either the diminution of liability in respect of unpaid company capital or the payment to any shareholder of any paid-up company capital (for the purposes of s. 85(4) of the 2014 Act).

Barniville J held that it was appropriate for him to: (a) sanction the scheme of arrangement between the Company and the relevant shareholders pursuant to s. 453(2) of the 2014 Act, having found that the requirements for such sanction had been fulfilled by the Company and that the scheme was fair and equitable; (b) confirm the special resolution approving the reduction of capital passed at the extraordinary general meeting of the Company on 14 October 2019; (c) order that the provisions of s. 85(4) of the 2014 Act shall not apply; and (d) make the further orders and directions set out in the draft order provided by the Company. Barniville J would also give liberty to apply to the Company.

Orders granted.

JUDGMENT of Mr Justice David Barniville delivered on the 11th day of May 2020

Introduction

1 The applicant, Allergan plc (the “Company”), seeks orders pursuant to the Companies Act, 2014 (the “2014 Act”) for, (a) the sanctioning of a proposed scheme of arrangement between it and holders of certain shares in the Company (the “scheme”) under Part 9, Chapter 1 of the 2014 Act and (b) confirming a special resolution approving a reduction of the capital of the Company by cancelling and extinguishing certain of its shares under s. 85(1).

2 The application arises in the context of an acquisition of the Company's share capital by a subsidiary of AbbVie Inc. (“AbbVie”), a Delaware company, in a US$63 billion transaction announced in June 2019. The purpose of the proposed scheme is to effect the acquisition of the entire issued, and to be issued, share capital of the Company by Venice Subsidiary LLC (“Venice”), a direct wholly owned subsidiary of AbbVie such that, on completion of the acquisition, the Company will be a wholly owned subsidiary of AbbVie. The Company is the parent company of a global pharmaceutical business with operations in more than 100 countries with approximately 17,000 employees. AbbVie is a global biopharmaceutical company with operations in 75 countries and approximately 30,000 employees.

3 I heard the Company's application for the orders referred to above on 6 May 2020 and in an ex tempore ruling that day, made orders sanctioning the proposed scheme and confirming the special resolution approving the reduction in the Company's capital as well as various ancillary orders. I was satisfied that it was appropriate to do so in light of the relevant legal tests as applied to the facts set out in the various affidavits sworn in support of the application. However, as the application raised an issue which, while present in a number of previous similar applications, has not yet been the subject of a written judgment of the Irish courts. I agreed to produce a written judgment addressing the issue and setting out my reasons for granting the Company's application.

4 The issue arises from the fact that more than 99% of the shares the subject of the scheme are held by investors in book entry form through the Depository Trust Corporation (“DTC”) in the United States, whose nominee, Cede & Co (“Cede”) is the registered holder and legal owner of the relevant shares. Those investors are beneficial owners and not legal owners of these shares. The balance of the shares (less than 1%) are held by persons other than Cede. Those persons are the registered and legal owners of the shares. As we shall see, Cede cast votes at the scheme meeting convened by the court in favour of and against the proposed scheme, to reflect the instructions given to the DTC by the beneficial owners of the relevant shares. This raises a number of questions in terms of the test applicable to the sanctioning by the court of schemes of arrangement, which it is appropriate to address in this judgment.

Procedural Background

5 On 10 September 2019, the High Court (Haughton J.) entered the proceedings in the Commercial List and made various further orders and directions in connection with the proposed scheme. The court ordered, pursuant to s. 450 (3), that a meeting of the holders of the Scheme Shares (as defined in the scheme) be convened to consider the proposed scheme and ordered that such meeting of scheme shareholders take place on 14 October 2019. The court further ordered pursuant to s. 450 (5), that all of the holders of the scheme shares would comprise one class for the purposes of the scheme meeting. The court ordered that the scheme meeting be advertised in a number of Irish and international publications and made various other orders concerning the conduct of the scheme meeting itself. Among those orders and directions was an order that each member of the Company entitled to more than one vote was not required, if it voted, to use its all of its votes or to cast all the votes used in the same way.

6 The scheme meeting went ahead on 14 October 2019. Cede was counted as voting both for and against the scheme. The scheme was approved by an overwhelming majority. The scheme was approved by 91.36% in number of the votes cast, representing 99.64% in value of the holders of the scheme shares present and voting in person or by proxy at the scheme meeting.

7 An extraordinary general meeting (the “EGM”) was held after the scheme meeting on 14 October 2019. Among the resolutions passed at the EGM was a special resolution approving the reduction in the Company's capital by cancelling and extinguishing all of the “cancellation shares” (as defined in the scheme) without thereby reducing the authorised share capital of the Company. The holders of shares, representing 99.79% of the shares in the company, voted in favour of that special resolution.

8 By an originating notice of motion dated 11 March 2020, the Company applied for orders sanctioning the proposed scheme and confirming the special resolution approving the reduction in the Company's capital. The application was grounded on a very detailed affidavit sworn by a Robert D. Bailey on 5 March 2020. Mr Bailey is the Company's Executive Vice President, Chief Legal Officer and Corporate Secretary. Affidavits were also sworn on behalf of the Company by Brenton L Saunders, the Company's Chairman, President and Chief Executive Officer, on 2 March 2020, by Sandra Lynn Moore of Computershare Trust Company N.A., on 6 February 2020, by Michelle Gribulis of Broadridge Investor Communications, on 21 February 2020 and by Donal Breatnach of Arthur Cox on, 16 March 2020.

9 On 16 March 2020, I fixed the hearing date for the Company's application for 6 May 2020. I gave directions in relation to the advertising of the hearing in a number of Irish and international publications. I...