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cent. debenture stockholders and its shareholders, and the other between
South Durham and its debenture stockholders and shareholders, each scheme
being conditional on the Court's sanctioning the other before the end of 1933.
On June 19, the Court ordered that Dormans and South Durham should convene
separate meetings of their debenture stockholders and classes of shareholders
to consider the respective schemes, and possibly approve them by letter
enclosing a print of the scheme and a proxy in the form settled in Chambers.
The confirmation of the schemes by the Court was sought under ss. 153 and 154
of the Companies Act, 1929.
Held: (1) when determining whether a compromise or arrangement should be
sanctioned, the Court must be satisfied that the resolutions in favour of it are
passed by the statutory majority in value and number, as required by s. 153, subs.
2, of the Companies Act, 1929 , and that the proposal is such as intelligent and
honest members of the classes concerned, acting in respect of their own
interests, would approve. (2) that s. 153 of the Companies Act, 1929 , gives a
general right to vote by proxy, using any proper form of proxy, and the proxies
need not be sent to the company's offices before the meeting. (3) that directors
who, pursuant to the Court's order, receive proxies for or against a scheme,
must use them. (4) that it is the Court's duty carefully to scrutinize complicated
schemes and that, in this case, Dormans' circular was insufficient, and
misleading in its reference to the approval of the scheme by the trustees for the
stockholders, and should have stated the amount of the revaluation. (5) that
the description in South Durham's circular of the auditors' report as if it were a
valuation of South Durham's assets was justified only if the report was prepared
solely in order to ascertain the relative values of the assets of Dormans and
South Durham, the opinions of South Durham's board were justified on an
optimistic view and the board had acted reasonably and in the best interests of
those concerned.
Drax Holdings Ltd. Re [2003] EWHC 2743 (Ch). Applications were made for the
court to summon creditor's meetings and sanction schemes of arrangement
under s.425 Companies Act 1985. The two companies involved were foreign, D
was incorporated in the Cayman Islands in 1999 as a subsidiary of a US company
AES, and P was incorporated in Jersey. D was unable to meet its debt liabilities in
relation to the purchase of a power station. P participated in the financial
arrangements in relation to the purchase of this power station and because the
D group could not make payments on its bonds P was unable to meet its own
obligations to the banks. D and P entered standstill agreements with their
creditors and schemes of arrangement were proposed under which creditors
were to receive a mixture of new secured indebtedness of a new Jersey
company, cash and shares in the new holding company – the ultimate owner of
the power station. The schemes were conditional on approval in the Cayman
Islands and Jersey in the case of D and P respectively and in England. The issue
for the English court was whether it had jurisdiction to sanction the schemes in
relation to foreign companies.
Held, allowing the application that D and P were unregistered companies which
the court had jurisdiction to wind up under the Insolvency Act 1986 and could be
the subject of orders under s.425 of the 1985 Act in accordance with s.425(6).
The conditions under s.221(1) of the 1986 Act were discretionary when deciding
whether to wind up the companies and the court did not have to be satisfied
that they had been met for the purposes s.425. Accordingly it was not a
question of jurisdiction and the companies could be wound up within s.425(6).
The court would not exercise jurisdiction in accordance with s.425 in respect of a
foreign company unless there was a sufficient connection with England. There
were many factors which showed that the exercise of jurisdiction was
legitimate and appropriate, in particular the fact that simultaneous orders
would made if the schemes were sanctioned in the courts of Cayman Islands