Re DEPFA Bank Plc

• Jurisdiction: Ireland
• Judge: Mr. JusticeKelly
• Judgment Date: 02 October 2007
• Neutral Citation: [2007] IEHC 463
• Date: 02 October 2007
• Docket Number: No. 382 COS/2007
• Court: High Court

[2007] IEHC 463

THE HIGH COURT

COMMERCIAL

No. 382 COS/2007

No. 105 COM/2007

Depfa Bank Plc, In Re

IN THE MATTER OF DEPFA BANK PLC

AND

IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2006 ON THE APPLICATION OF DEPFA BANK PLC

COLONIA INSURANCE (IRELAND) LTD, RE 2005 1 IR 497

OSIRIS INSURANCE LTD, RE 1999 1 BCLC 182

ENGLISH SCOTTISH & AUSTRALIAN CHARTERED BANL, RE 1893 3 CH 385

BUCKLEY COMPANIES ACTS 15ED PARA 425.49A

COMPANY LAW

Scheme of arrangement

Solvent company - Jurisdiction to approve scheme of arrangement - Conditions to be fulfilled - Whether sufficient steps taken to identify and notify all interested parties - Whether statutory requirements and court directions complied with - Whether classes of creditors properly constituted - Whether coercion - Whether intelligent and honest member of class acting in respect of interest might reasonably approve - Whether giving undertakings constitutes directors as separate class - Function of court - Relevance of proceedings instituted by shareholder in Germany - Effect of undertaking given by acquiring company and trustee to be bound by scheme - Re Colonia Insurance (Ireland) Ltd [2005] IEHC 115, [2005] 1 IR 497 applied; Re Osiris Insurance Ltd [1999] 1 BCLC 182 and In re English, Scottish, and Australian Chartered Bank [1893] 3 Ch 385 followed - Scheme of arrangement approved (2007/382COS and 2007/105COM - Kelly J - 2/10/2007) [2007] IEHC 463

In re Depfa Bank plc

In Re Colonia Insurance (Ireland) Limited [2005] 1 IR 497, the Court considered that it had jurisdiction to approve a scheme of arrangement in respect of a solvent company and set forth conditions which had to be fulfilled in an application of that kind. In the present proceedings, Hypo Real Estate Holdings AG (Hypo) proposed to acquire by scheme of arrangement all of the issued share capital in Depfa Bank plc in payment of a consideration to the shareholders of that bank which was to made partly in cash and partly in shares in Hypo.

Held by Kelly J. in approving the scheme of arrangement that the five conditions identified in the Colonia case had been satisfied.

Reporter: R.W.

Note of ex tempore judgment delivered by

Mr. Justice Kelly

on 2nd October, 2007

1 In the case ofRe Colonia Insurance (Ireland) Limited [2005] 1 I.R. 497, I had to adjudicate for the first time on a scheme of arrangement in respect of a solvent company. In that case I considered and followed a number of English authorities, in particular the decision in Re Osiris Insurance Limited [1999] 1 B.C.L.C.182 and Re English Scottish and Australian Chartered Bank [1893] 3 Ch. 385.

2 I considered that I had jurisdiction to approve a scheme of arrangement in respect of a solvent company. I set forth the conditions which have to be fulfilled in an application of that kind, namely:-

3 (i) the court must be satisfied that sufficient steps have been taken to identify and notify all interested parties;

4 (ii) the court must be satisfied that the statutory requirements and all directions of the court have been complied with;

5 (iii) the court must be satisfied that the classes of creditors were properly constituted;

(iv) the issue of coercion must not arise; and

6 (v) the scheme of arrangement must be such that an intelligent and honest man, a member of the class concerned, acting in respect of his interest might reasonably approve of it.

7 3. The scheme under consideration in the Coloniacase was substantially different from that under consideration in the present case. The Colonia case concerned a non-life insurance company that had ceased to write new policies. The scheme of arrangement involved the run off of liabilities of the insurance company where a mechanism had to be put in place to shorten the time for quantifying and paying off liabilities that were considered likely to arise on foot of the policies written by the company.

8 4. What I have to consider here can be described in a single sentence - namely that Hypo Real Estate Holdings A.G. (Hypo) proposes to acquire by scheme of arrangement all of the issued share capital in Depfa Bank Plc in payment of a consideration to the shareholders of that bank which is to be made partly in cash and party in shares in Hypo. While the position can be stated simply, it is clear that the proposed transaction is a great deal more complicated as evidenced by the volume of paper generated in dealing with the large number of regulatory matters to be addressed.

9 5. I now turn to each of the five conditions identified in the Colonia case.

10 6. As regards the first...