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LPC Exam Notes - Mergers & Acquisitions Workshop 9 (University of Law)
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Complete notes covering Workshop 9 of the University of Law's M&A Elective. - Schemes of Arrangement
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ACQ9Schemes of Arrangement
Structure and content of a scheme document
What kind of scheme is contemplated by the Scheme Document and how does it work to transfer
Question 1
control of the target to the bidder?
The scheme is a TRANSFER SCHEME = the shares in the target (Domino) not already owned by the bidder (Brother) are
transferred to Brother in exchange for cash or loan notes from Brother under the scheme. Once sanctioned by the
Court the scheme becomes binding on all shareholders.
Transfer scheme = transfer of existing offeree shares to offeror, in exchange for payment of consideration by
offeror to offeree
Question 2 Who are the parties to the Scheme?
The parties to the scheme are Domino (Target) and its shareholders.
It is the target’s scheme and therefore generally needs the co-operation of the target’s board. (In theory a
scheme could be used in a hostile situation but there are currently no examples of successful attempts to do so.)
Brother undertakes through its counsel at the Court Hearing to be bound by the scheme (see Para (D), page 40 Scheme
Document).
The target is in control; the bidder cannot influence proceedings in the same way as in a contractual offer.
The Court’s primary concern will be seeing that the scheme is fair to all shareholders.
The bidder normally reserves the right to switch to a takeover offer, subject to the consent of the Panel (see para 7, page
33).
Question 3 What are the primary sources of law and regulation governing the Scheme?
Part 26 Companies Act 2006 (CA06) and the Takeover Code (through Paragraph 3(b) are the key pieces of legislation
and secondary legislation governing schemes of arrangement.
The basic process is as follows:
The target asks the Court to order a meeting of members (known as the Court Meeting) = s.896 CA06
An explanatory statement is circulated to shareholders under s.897 CA06 with a notice summoning the meeting
(see Part II of the Scheme Document (stated to be in compliance with s.897 CA06) and Part XI
o The Court Meeting of shareholders is not to be confused with any parallel General Meeting of the
shareholders that may be necessary to deal with related issues (e.g. the amendment of the target’s
articles, as in the Domino transaction).
Approval by shareholders at the Court Meeting – this requires a majority in number representing not less than
75% in value of those present and voting (s.899 CA06). Compared to an offer it is easy to get this.
GM convened by D’s (immediately after Court Meeting) – Part XII, pg 70
The sanction of the Court is then required for the scheme to proceed. The target must satisfy the Court that
there was a fair representation of shareholders at the Court Meeting and that the scheme is reasonable/fair
to the honest/intelligent shareholder.
The Takeover Code applies in the same way as to a contractual offer but with the modifications set out in
Appendix 7 of the Code
Explain which parts of the Takeover Code (including Appendix 7) and/or the Companies Act 2006
Question 4
the following sections of the Scheme Document comply with:
1
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