[2008]JRC025
royal court
(Samedi Division)
14th February 2008
Before : |
M. C. St. J. Birt, Esq., Deputy Bailiff, and Jurats Le Breton and Morgan. |
In the Matter of Real Estate Opportunities Limited
And in the Matter of Part 18A of the Companies (Jersey) Law 1991
Advocate B. H. Lacey for Real Estate Opportunities Limited.
judgment
the deputy bailiff:
1. This is an application by Real Estate Opportunities Limited for two orders from this Court. First, an approval of a scheme of arrangement and secondly, an associated reduction in share capital.
2. The Company is an investment company investing substantially in property projects. The Company has ordinary shares but it also has issued zero dividend preference ('ZDP') shares. The Articles provide that the Company must be wound up on a date in May 2011, and at that time the ZDP shares will receive 235.51 pence per share.
3. The fact there is a fixed date for winding-up is giving rise to some uncertainty and it is difficult for the Company to take on long term investment projects. It is proposed therefore to amend the Articles of Association of the Company to remove the requirement for the winding-up in 2011, but of course the ZDP shareholders need to be protected against any such change. So that is why the Company has proposed a scheme of arrangement.
4. The scheme involves the Company incorporating a new wholly-owned subsidiary called "REO Securities Limited". The ZDP shares in the Company will be cancelled and in exchange each ZDP shareholder will receive 1 ZDP share in REO Securities for every ZDP share which he holds in the Company; in other words a one for one swap.
5. The rights attached to the new ZDP shares in REO Securities Limited will be identical to the rights attaching to the current ZDP shares. Thus the subsidiary is to be wound-up on the same date in May, 2011, and at that time the ZDP shareholders in the subsidiary will be entitled to 235.51 pence per share.
6. The Company has entered into an agreement with REO Securities undertaking to make available all sums necessary to ensure that the ZDP shareholders are paid that sum on the winding-up of REO Securities. The necessary meetings have been held, including the meeting ordered by the Court. The scheme has been approved by the requisite majority; ZDP shareholders approved by 99.95% of the votes cast and also the majority in number of the shareholders represented.
7. The Court's task is simply to assess whether this is a fair and proper scheme which the shareholders could reasonably consider to be in their interests. The Court considers that is so and accordingly approves the scheme.
8. In relation to the reduction of share capital, there is the necessary cancellation of the ZDP shares. However, there is a substantial share premium account. There is also a deficit on the revenue reserves. The Company has resolved to reduce the share premium account to nil and to use it to clear the deficit on the reserves and to apply the surplus to a general reserve which can be distributed to shareholders in future.
9. The test here is well established. We must ask first whether there is a clear rationale for the reduction and we are satisfied there is. Secondly, we must consider whether the matter has been clearly explained to shareholders and that they have been treated equitably. We are satisfied that this requirement is also met.
10. Finally, and importantly, we must consider the question of creditors. In this case, all the creditors have consented to the reduction in share capital and we are satisfied therefore that we can waive the requirement for them to be circulated. Accordingly, we make the order as requested.
11. Returning to the draft acts we approve paragraphs 1 and 2 of the representation. We do not think it necessary to approve the associated changes in the articles as that is not a function for this Court. By approving the scheme it is clear that any amendments to the Articles necessary to achieve the scheme are in order. In relation to the reduction of share capital we approve the draft act as prepared for us.
No Authorities