Monday, 22 April 2013

UK: England and Wales: consent solicitation and consent payments upheld by court

The Court of Appeal gave judgment today in Azevedo & Anor v Imcopa Importacao, Exportacao E Indústria De Oleos Ltd & Ors [2013] EWCA Civ 364. At issue in this important decision was whether English law permitted companies to solicit and procure votes in respect of a financial restructuring proposal by offering and making cash payments (so-called consent payments) to those members of the relevant class voting in favour of the proposal (and excluding those not voting or voting against). The court unanimously held that this practice was permitted, Lloyd LJ stating (at paras. [69] and [71]):

I see nothing wrong in principle with the idea that a company, which has taken the view that a particular course of action is in its best interests and in those of its creditors and shareholders, but which requires favourable votes from one or more classes, should take part in the process which leads to the relevant resolution being put to the necessary vote. It seems to me that it would be extraordinary to suggest that the company cannot take part in the process. Indeed, in practical terms, it must do so. The only issue is whether it is allowed to strengthen its urging and encouragement in favour of a vote by offering an incentive. For my part I find no objection to that in principle under English law, so long as all is open and above board ..

I would hold that it is not inconsistent with English company law ... for the Issuer to offer a consent payment to Noteholders who vote in favour of a resolution proposed for their consideration as a class, where the payment is available to all members of the class, and provided that the basis of the payment is made clear in the documents relating to the resolution, the meeting and the vote, as was the case here."

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