Re SABmiller plc—Shareholders consenting to exclusion from scheme meetings.

This analysis considers the decision in Re SABmiller plc [2016] EWHC (Ch) 23 involving Anheuser-Busch InBev’s takeover of SABmiller plc (SABMiller), where the High Court considered whether the court had jurisdiction to summon a scheme meeting which did not include two of SABmiller’s major shareholders.

What was the background to the case?

In this case, SABMiller sought an order under Companies Act 2006, s 896 (CA 2006) summoning a single meeting of all of its ordinary shareholders other than Altria Group Inc. (Altria) and BEVCO Ltd. (BEVCO) for the purpose of considering a scheme of arrangement (scheme). The object of the scheme was to effect the acquisition of SABMiller by Newbelco SA/NV (Newbelco).

Altria was SABMiller's largest shareholder, with 26.48% of its ordinary share capital, and BEVCO was the second largest shareholder, with 13.85%. Both Altria and BEVCO had an existing relationship agreement with SABMiller entitling them among other things to appoint directors of SABMiller. Altria also had an agreement relating to tax matters.

What was unusual about the case?

Both Altria and BEVCO had consented to SABMiller's proposal that there should only be one scheme meeting of the 'public shareholders', and that each of Altria and BEVCO would appear by counsel and undertake to the court at the sanction hearing to be bound by the scheme in their capacity as the holder of scheme shares. The commercial rationale for excluding them from the meeting was to avoid the risk of the approval of the scheme being challenged on the basis of either the large voting blocks held by Altria and BEVCO or the special rights that they enjoyed as shareholders.

One group of shareholders, Soroban Master Fund LP and Soroban Opportunities Master Fund LP (together Soroban) attended the convening hearing. Unusually, Soroban was not a dissentient shareholder, however it argued that the court had no jurisdiction to do what SABMiller proposed. Soroban submitted that there should only be one class meeting to which all scheme shareholders were summoned and at which they should be entitled to vote, and that the court could not convene a meeting of the 'public shareholders' from which Altria and BEVCO were excluded.

What did the High Court decide?

The High Court held that it did have jurisdiction to order a meeting of SABMiller shareholders to be summoned which did not include Altria and BEVCO. The court gave the following justifications for its decision. Firstly, it was not for Soroban to enforce Altria and BEVCO's undertakings. Secondly, there was nothing in the statutory wording to suggest that a member or creditor cannot voluntarily agree to waive or forgo the right to participate in a scheme meeting. Thirdly, the purpose of the scheme jurisdiction is to facilitate compromises or arrangements, by supplying a statutory alternative to an agreement between the company and its relevant members or creditors, in a case in which the company cannot obtain the consent of all such members or creditors. Finally, where a member or creditor is not acting under compulsion, and is willing to give his consent voluntarily by agreeing to give an undertaking to be bound by the proposal and not to be included in the scheme meeting, there is no confiscation of his property or rights and no injustice to him or other members and creditors.

What practical lessons are there to be learned from the judgment?

The case is significant because it demonstrates how the courts will interpret the statutory provisions flexibly so as to coincide with the legislative intention to promote compromises and arrangements, so as to permit the court, where appropriate, to accept undertakings from creditors or members to be bound by the scheme. It also highlights the tactical reasons why a shareholder may voluntarily consent to being excluded from a shareholder meeting.

For details, see News Analysis: Re SABmiller plc—Shareholders consenting to exclusion from scheme meetings.

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