Scisys Group Plc v The Companies Act 2014

• Jurisdiction: Ireland
• Judge: Mr. Justice David Barniville
• Judgment Date: 17 December 2019
• Neutral Citation: [2019] IEHC 904
• Docket Number: [2019 No.253 COS]
• Court: High Court
• Date: 17 December 2019

[2019] IEHC 904

THE HIGH COURT

COMMERCIAL

David Barniville

[2019 No.253 COS]

[2019 No. 85 COM]

IN THE MATTER OF SCISYS GROUP PLC

AND IN THE MATTER OF THE COMPANIES ACT, 2014

AND IN THE MATTER OF THE IRISH TAKEOVER PANEL ACT, 1997

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

AND IN THE MATTER OF SECTIONS 84 TO 86 OF THE COMPANIES ACT, 2014

Scheme of arrangement – Reduction of capital – Companies Act 2014 – Company seeking an order pursuant to s. 453 (2) of the Companies Act 2014 sanctioning a scheme of arrangement between the Company and its shareholders – Whether sufficient steps had been taken to identify and notify all interested parties

Facts: SCISYS Group Plc (the Company) applied to the High Court for various orders in connection with the intended acquisition of the Company by the CGI Group Holdings Europe Ltd. The following orders were sought by the Company on this application: (1) an order pursuant to s. 453 (2) of the Companies Act 2014 sanctioning a scheme of arrangement between the Company and its shareholders; and (2) an order pursuant to s. 85 (1) of the 2014 Act confirming the reduction of capital which was approved by special resolution of the members of the Company passed on 7th August, 2019 as well as various other orders under ss. 85 and 86 of the 2014 Act in connection with that capital reduction.

Held by Barniville J that the test which is applied by the Irish courts in considering whether to sanction a scheme of arrangement is well established; the classic statement of the test is to be found in the judgment of Kelly J in In Re Colonia Insurance (Ireland) Ltd [2005] 1 IR 498. Barniville J noted that the test requires the court to be satisfied of the following five matters, namely, that: (1) sufficient steps have been taken to identify and notify all interested parties; (2) the statutory requirements and all directions of the court have been complied with; (3) the class of members or creditors, as the case may be, has been properly constituted; (4) there is no improper coercion of any of the members (or creditors, as the case may be), concerned; and (5) the scheme is such that an intelligent and honest person, being a member of the class concerned, acting in respect of his or her interest, might reasonably approve of it. In Barniville J’s view, the evidence before the court was such that the court could be satisfied of those five matters and he was so satisfied. Barniville J held that the principles to be applied by a court in exercising its discretion as to whether or not to confirm a resolution reducing the share capital of a company under s. 85 of the 2014 Act were set out and summarised by the High Court (Barrett J) in In Re Permanent TSB Group Holdings plc. [2015] IEHC 500; at para. 42 of his judgment in that case, Barrett J set out the following six factors of which the court must be satisfied before it should confirm a proposed capital reduction: “(1) In a case to which the Act of 1963 applies, the company is authorised by its articles of association to reduce its capital; (2) the company duly resolved by special resolution to reduce its share capital; (3) the reduction proposals were properly explained to the shareholders so that they could exercise an informed judgment; (4) the reduction of share capital is for a discernible purpose; (5) all shareholders are treated equitably; and (6) the creditors of the company are safeguarded.” Barniville J held that each of the requirements summarised by Barrett J in Permanent TSB were satisfied in this case. As the proposed reduction did not involve either a 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, and as the reduction of capital was a momentary state of affairs and there was no impact on the position of the creditors of the Company, Barniville J was satisfied that there was no requirement for the court to settle a list of creditors under s. 85(4) of the 2014 Act.

Barniville J held that he would: (a) sanction the scheme of arrangement between the Company and the scheme shareholders pursuant to s. 453(2) of the 2014 Act, having found that the applicable test had been satisfied and that the scheme was fair and equitable; (b) confirm the proposed reduction of the issued share capital of the Company pursuant to the share cancellation resolution passed at the extraordinary general meeting of the Company; (c) order that the provisions of s. 85(4) of the 2014 Act shall not apply; (d) make the further orders set out in the draft order provided by the Company. Barniville J held that he would give liberty to apply.

Orders approved.

EX TEMPORE JUDGMENT of Mr. Justice David Barniville delivered on the 17th day of December, 2019

Introduction

1 This is my judgment on an application by SCISYS Group Plc (the “Company”) for various orders in connection with the intended acquisition of the Company by the CGI Group Holdings Europe Ltd (“CGI”).

2 I was due to give my judgment on the Company's application on 14th November, 2019. However, at the request of the Company and CGI, I adjourned the matter to 17th December, 2019, being a date after the general election in the United Kingdom (which was to take place, and did take place, on 12th December, 2019) which was stated to be a key event for the news programming of the media and broadcasting business of the Company in the United Kingdom. I deferred ruling on the application at that stage, as requested. Since that event has now happened, it is agreed that I can now give my judgment.

Orders sought

3 The following orders are sought by the Company on this application:

(1) An order pursuant to s. 453 (2) of the Companies Act, 2014 (the “2014 Act”) sanctioning a scheme of arrangement between the Company and its shareholders (the “Scheme”), and

(2) An order pursuant to s. 85 (1) of the 2014 Act confirming the reduction of capital which was approved by special resolution of the members of the Company passed on 7th August, 2019 as well as various other orders under ss. 85 and 86 of the 2014 Act in connection with that capital reduction.

4 I will deal first with the Company's application to sanction the scheme. I will then deal with the capital reduction application.

Scheme of arrangement: s. 453 (2) of 2014 Act

Background and procedural issues

5 An order was made by the High Court (Haughton J.) on 8th July, 2019 admitting the Company's applications to the Commercial List, summoning a meeting of scheme shareholders (as that term is defined in the scheme) under s. 450 (3) of the 2014 Act and giving various directions in relation to the advertising and conduct of that meeting. The court directed that the scheme shareholders meet and vote as a single class.

6 The scheme meeting took place, on foot of that order, on 7th August, 2019. The Scheme was approved by an overwhelming majority of the scheme shareholders who were present in person or by proxy and voting at the scheme meeting. 97.4% of the voting scheme shareholders voted in favour of the Scheme. Of the 151 scheme shareholders present in person or by proxy and voting, 144 shareholders voted in favour of the Scheme. Seven voted against.

7 Following the scheme meeting, an extraordinary general meeting of the Company was held. Resolutions were passed adding the entering into of schemes of arrangement as an additional object of the Company and approving the Scheme.

8 The board of the Company was recommending the Scheme for the various reasons outlined in the affidavit sworn by Mike Love on 16th August, 2019 grounding the Company's application for court sanction in respect of the scheme.

9 By an originating notice of motion dated 20th August, 2019, the Company applied for orders fixing the date of the hearing of the application to sanction the Scheme (and for the associated capital reduction orders) and for directions in relation to that hearing.

10 On 27th August, 2019, being satisfied that the directions contained in the order of 8th July, 2019 had been complied with, I fixed Wednesday, 30th October, 2019 as the date for the hearing of the application to sanction the Scheme (and for the associated capital reduction orders). I directed that the hearing date be advertised in a number of Irish, UK and international publications and in Iris Oifigiúil by 10th September, 2019. I also gave directions in the event that any interested person wished to appear at the hearing. Notice of any intention to do so had to be provided by a specified date in advance of the hearing.

11 The reason why the hearing was fixed for a date over two months from the date the proceedings were entered in the Commercial List was because the Scheme was subject to certain regulatory and anti-trust/competition conditions, some of which remained outstanding as of 27th August, 2019. However, it was expected that those conditions would be satisfied, and the required clearances obtained, by the end of 2019.

12 Prior to 30th October, 2019, being the date fixed for the sanction hearing, I was informed that, while the outstanding clearances had been obtained, certain further steps for the proposed delisting of the Company's ordinary shares from the AIM and Euronext Growth platforms had not yet been effected. It was agreed, however, that the application could proceed on 30th October, 2019, but that no order would be made that day and that the application would be further adjourned to enable the outstanding steps to be completed thereafter.

13 No person had given notice of his or her intention to appear at the hearing and no person appeared. As the proceedings are “takeover proceedings” under 0. 75 r.18 RSC, they were served on the Director of the Irish Takeover Panel (the “Panel”). The Director was served with the papers in advance of...