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issued a third circular which stated that the Board had considered preferential
rights and decided that the rights of the preference stockholders under s.25 had
no monetary value and they therefore proposed reduced repayments at par
only. There was no special meeting of preferential stockholders to approve this
but nonetheless this was approved by an extraordinary meeting of the
company on 10 May 1953 with the effect that the capital of the company could
be reduced by repaying each stockholder the whole paid‐up capital of his
holding.
On petition for confirmation of this it was held that; (1) the special resolutions of
August 22 1950 and October 16 1951 attached special rights to the preferential
stock which were contractual in nature and evidenced the intention that the
preferential stockholders should be entitled to claim under section 25 on the
basis that they remained proprietors of the amount of stock which they would
have held had there been no reduction of their capital at all; (2) these special
rights were abrogated by the special resolution of 19 May 1953 and accordingly
in order to carry out the desired reduction it was necessary to gather the
approval of the preference stockholders in accordance with the company's
articles – this had not occurred and therefore the resolution for reduction was
not passed validly; (3) it was further held that it would be inequitable for the
Board to reverse what had gone before as the preference stockholders would
have already acted upon the representations contained in the first two
resolutions; (4) accordingly the court should refuse the petition.
Osiris Insurance Ltd, Re [1999] 1 B.C.L.C 182. An application was made by Osiris
for an order under the Companies Act 1985 to sanction a scheme of
arrangement. An issue arose as to the validity of the meeting at which the
policyholders voted in favour of the scheme. Held: the meeting was conducted
validly because the creditors were of one type even though the contracts which
gave rise to their liabilities were different and their interests did not conflict. The
court was required to apply the standard of an "intelligent and honest man" in
the role of one of the creditors deciding whether to approve the scheme.
Furthermore a substantial number of policy holders had voted in favour of the
scheme and sufficient efforts had been made to bring the scheme to the
attention of other creditors.
Pan Atlantic Insurance Co Ltd, Re [2003] EWHC 1969. Provisional liquidators
petitioned for the sanction of a scheme which contained a clause permitting the
resolution of disputes by an independently appointed adjudicator whose
decision would be final and binding. The scheme also introduced time limits for
the claims. The court held that such restrictions did not infringe the creditor's
rights under the Human Rights Act 1998 Sch. 1 Part I Art. 6 because the
creditors' right of access to court was not totally restricted and any decision
made by the adjudicator would only be final and binding to the extent that was
permitted by law. It was also likely that most creditors expected a time bar to
exist and the scheme was on the whole beneficial to creditors. It was held to be
unclear whether the Insurers (Reorganisation and Winding Up) Regulations
2003 would apply as all creditors were insurance creditors. It was held that even
if there were other creditors as well as insurance creditors, the Regulations
would not apply because the liquidators had been appointed before the
Regulations came into force.
Practice Statement (Ch D: Schemes of Arrangements with Creditors). The Vice
Chancellor issued a practice statement to be followed on applications under the
Companies Act 1985 s.425 where a court sanction is sought for a scheme of
arrangement between a company and its creditors. The purpose of the
statement was to enable issues regarding the composition of classes of
creditors and the summoning of meetings to be identified and resolved early on
in proceedings.