UK: FCA consultation - guidance for firms seeking to limit their liabilities through compromises

The Financial Conduct Authority has published, for consultation, proposed guidance for firms seeking to limit their liabilities through compromises including schemes of arrangement, restructuring plans and voluntary arrangements: see here (pdf). In the consultation paper, the FCA explains (at para.1.2):

With this guidance we aim to help firms understand what information we need and how we approach compromises in line with our statutory objectives to protect consumers and the integrity of markets, with a view to reducing the number of proposed compromises that we do not consider to be appropriate. We also remind firms of their regulatory obligations, in line with Principle 11, to notify usimmediately and provide relevant information at an early stageif they are considering proposing a compromise. Where firms determine there is no better alternative outcome for consumersthan to propose a compromise, the guidance will help firms to propose acceptable compromises that are compatible with our rules, including the Principles for Businesses, and statutory objectives. In particular, if firms do propose a compromise in respect of redress liabilities, they should ensure it is the best proposal that the firm can make, which includes the firm providing the maximum amount of funding for the compromise so that consumers receive the greatest proportion of what is owed to them."

UK: England and Wales: schemes of arrangement and the beneficial owners of shares

The transcript for Re Sirius Minerals Plc [2020] EWHC 1447 (Ch), a decision of Mr Justice Fancourt from March this year, has recently been added to BAILII. The trial judge sanctioned a scheme of arrangement under section 899 of the Companies Act 2006, noting that the documentation had been sent to the registered members and there was no requirement to send documents to the beneficial owners of shares even if the company had records of these beneficial owners. The trial judge nevertheless noted - and this is why I note the decision here - that the law as it stood raised a "genuine issue about shareholder democracy".

UK: The Companies Act 2006 (Amendment of Part 17) Regulations 2015

The Companies Act 2006 (Amendment of Part 17) Regulations 2015 were made on 3rd March and came into force on 4 March: see here or here (pdf). In general terms, the Regulations amend section 641 ("Circumstances in which a company may reduce its share capital") of the Companies Act 2006 in order to restrict the ability of companies to effect a takeover through so-called cancellation schemes of arrangement. Further information is available in the accompanying explanatory memorandum: see here (pdf).

UK: Restricting share capital reductions in takeovers

Last year, in the Autumn Statement, the Government announced that in order to protect the stamp duty tax base it would introduce legislation to prevent the use of 'cancellation' schemes of arrangement for company takeovers (such schemes enable stamp duty tax to be avoided). A draft of the proposed legislation - The Companies Act 2006 (Amendment of Part 17) Regulations 2015 - has now been published (see here, pdf) together with an information and impact note (here, pdf).

Singapore: the meaning of 'creditor' for the purposes of section 210 of the Companies Act

At the end of last month the Singapore Court of Appeal gave judgment in SAAG Oilfield Engineering (S) Pte Ltd (formerly known as Derrick Services Singapore Pte Ltd) v Shaik Abu Bakar bin Abdul Sukol and another and another appeal [2012] SGCA 7. This is an important case in which the court considered the meaning of 'creditor' for the purposes of Section 210 ('Power to compromise with creditors and members') of the Companies Act (Cap 50, 2006 Rev Ed). The court held, reversing the decision of the trial judge, that the fact that a creditor's claim was covered by insurance did not mean that the creditor could not be a creditor for the purposes of Section 210.

UK: England and Wales: schemes of arrangement and the meaning of 'creditors'

The Court of Appeal has delivered an important decision concerning schemes of arrangement under Part 26 of the Companies Act (2006). At issue in Re Lehman Brothers International (Europe) [2009] EWCA Civ 1161 was the meaning of 'creditors' within Section 895(1) of the 2006 Act. Section 895(1) provides that Part 26 applies "where a compromise or arrangement is proposed between a company and - (a) its creditors, or any class of them, or (b) its members, or any class of them".

The court held, in the absence of a statutory definition, that a creditor within Section 895 did not include a beneficiary of property held on trust by the company. Patten LJ, with whom the Master of the Rolls and Longmore LJ agreed, observed (at paras. [59] and [66]):

It is obvious that someone with a purely proprietary claim against the company is not its creditor in any conventional sense of that word. As a matter of ordinary language, a creditor is someone to whom money is owed. The use of this word with that meaning is a long-established and essential part of English company law ... Given that "creditor" is not defined in the legislation, it is inconceivable that Parliament should have used the word in the 2006 Act in any but its literal sense ... A person is the creditor of a company only in respect of debts or similar liabilities due to him from the company. I am not persuaded that Parliament can have intended to allow creditors to be compelled (if necessary) to give up not merely those contractual rights but also their entitlement to their own property held by the company on their behalf".

Update (10 November 2009): the ICLR, as part of its WLR Daily service, has provided a summary of the decision here.