Chairman of scheme meeting can disallow votes in manipulative share splitting instances (Dee Valley Group plc)

Chairman of scheme meeting can disallow votes in manipulative share splitting instances (Dee Valley Group plc)
Corporate analysis: In this case, the High Court considered whether the chairman of a class meeting directed by the court in the context of a scheme of arrangement was right to disallow the votes of 434 individual shareholders who voted against the scheme where there had been share splitting. This is the first case in which a share-splitting exercise was undertaken in order to defeat a scheme of arrangement between a company and its shareholders.

Original news

Dee Valley Group plc [2017] EWHC 184 (Ch)

In this case, the High Court considered whether the chairman of a class meeting directed by the court (the Chairman) in the context of a scheme of arrangement was right to disallow the votes of 434 individual shareholders (Individual Shareholders) who voted against the scheme where there had been share splitting. This is the first case in which a share-splitting exercise was undertaken in order to defeat a scheme of arrangement between a company and its shareholders.

What was the background to the case?

This case arose in the takeover of Dee Valley Group plc (the Company) by Severn Trent Water Limited (Severn Trent) by way of a scheme of arrangement.

The Company applied to the court to sanction a scheme of arrangement between the Company and its members under Part 26 of the Companies Act 2006 (CA 2006). The scheme would enable Severn Trent to acquire all the issued share capital in the Company for 1,825 pence per share. The court directed that:

  • a meeting of the members be convened to approve or object to the proposed scheme, and
  • shareholders included in the Company's register of members as at 6pm two business days before the meeting would be entitled to attend and vote at the meeting

Following this direction, Mr Cashmore, a shareholder who objected to the takeover by Severn Trent, acquired additional shares in the Company and then transferred these shares to new shareholders (who were registered as

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