Scisys Group PLC v The Companies Act 2014 [2019] IEHC 904 (17 December 2019)

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ARRANGEMENT PURSUANT TO PART 9, CHAPTER 1 OF THE COMPANIES ACT, 2014

AND IN THE MATTER OF SECTIONS 84 TO 86 OF THE COMPANIES ACT, 2014

EX TEMPORE JUDGMENT of Mr. Justice David Barniville delivered on the 17th day of

1. This is my judgment on an application by SCISYS Group Plc (the “Company”) for various

orders in connection with the intended acquisition of the Company by the CGI Group

2. I was due to give my judgment on the Company’s application on 14th November, 2019.

However, at the request of the Company and CGI, I adjourned the matter to 17th

December, 2019, being a date after the general election in the United Kingdom (which

was to take place, and did take place, on 12th December, 2019) which was stated to be a

key event for the news programming of the media and broadcasting business of the

Company in the United Kingdom. I deferred ruling on the application at that stage, as

requested. Since that event has now happened, it is agreed that I can now give my

3. The following orders are sought by the Company on this application:

(1) An order pursuant to s. 453 (2) of the Companies Act, 2014 (the “2014 Act”)

sanctioning a scheme of arrangement between the Company and its shareholders

(2) An order pursuant to s. 85 (1) of the 2014 Act confirming the reduction of capital

which was approved by special resolution of the members of the Company passed

on 7th August, 2019 as well as various other orders under ss. 85 and 86 of the

4. I will deal first with the Company’s application to sanction the scheme. I will then deal

5. An order was made by the High Court (Haughton J.) on 8th July, 2019 admitting the

Company’s applications to the Commercial List, summoning a meeting of scheme

shareholders (as that term is defined in the scheme) under s. 450 (3) of the 2014 Act and

giving various directions in relation to the advertising and conduct of that meeting. The

court directed that the scheme shareholders meet and vote as a single class.

6. The scheme meeting took place, on foot of that order, on 7th August, 2019. The Scheme

was approved by an overwhelming majority of the scheme shareholders who were

present in person or by proxy and voting at the scheme meeting. 97.4% of the voting

scheme shareholders voted in favour of the Scheme. Of the 151 scheme shareholders

present in person or by proxy and voting, 144 shareholders voted in favour of the

7. Following the scheme meeting, an extraordinary general meeting of the Company was

held. Resolutions were passed adding the entering into of schemes of arrangement as an

8. The board of the Company was recommending the Scheme for the various reasons

outlined in the affidavit sworn by Mike Love on 16th August, 2019 grounding the

Company’s application for court sanction in respect of the scheme.

9. By an originating notice of motion dated 20th August, 2019, the Company applied for

orders fixing the date of the hearing of the application to sanction the Scheme (and for

the associated capital reduction orders) and for directions in relation to that hearing.

10. On 27th August, 2019, being satisfied that the directions contained in the order of 8th

July, 2019 had been complied with, I fixed Wednesday, 30th October, 2019 as the date

for the hearing of the application to sanction the Scheme (and for the associated capital

reduction orders). I directed that the hearing date be advertised in a number of Irish, UK

and international publications and in Iris Oifigiúil by 10th September, 2019. I also gave

directions in the event that any interested person wished to appear at the hearing. Notice

of any intention to do so had to be provided by a specified date in advance of the hearing.

11. The reason why the hearing was fixed for a date over two months from the date the

proceedings were entered in the Commercial List was because the Scheme was subject to

certain regulatory and anti-trust/competition conditions, some of which remained

outstanding as of 27th August, 2019. However, it was expected that those conditions

would be satisfied, and the required clearances obtained, by the end of 2019.

12. Prior to 30th October, 2019, being the date fixed for the sanction hearing, I was informed

that, while the outstanding clearances had been obtained, certain further steps for the

proposed delisting of the Company’s ordinary shares from the AIM and Euronext Growth

platforms had not yet been effected. It was agreed, however, that the application could

proceed on 30th October, 2019, but that no order would be made that day and that the

application would be further adjourned to enable the outstanding steps to be completed

13. No person had given notice of his or her intention to appear at the hearing and no person

appeared. As the proceedings are “takeover proceedings” under O.75 r.18 RSC, they

were served on the Director of the Irish Takeover Panel (the “Panel”). The Director was

served with the papers in advance of the hearing on 30th October, 2019 and was

informed of the Company’s intentions as regards the adjournment of the application. The

Company has kept the Panel informed of the ongoing developments in relation to the

14. At the hearing on 30th October, 2019, I was satisfied that the directions made on 27th

August, 2019 in relation to the advertising of the sanction hearing had been complied

with. Evidence to that effect was provided in an affidavit sworn by David Ormsby (a

solicitor in Mason Hayes & Curran, the Company’s solicitors) on 29th October, 2019.

15. Counsel for the Company took me through the papers to demonstrate compliance with

the statutory and other requirements for the sanctioning of a scheme of arrangement

under Part 9, Chapter 1 of the 2014 Act. I was also provided with very helpful written

submissions in support of the Company’s application. As requested by the Company, I

agreed to defer ruling on the application until 14th November, 2019 and further deferred

my ruling to today’s date for the reasons explained earlier in this judgment.

16. Prior to delivering my ruling on the Company’s application on 17th December, 2019, I

was furnished with an affidavit sworn by Mr. Ormsby on 16th December, 2019 which

evidenced the provision of the papers in respect of the Company’s application and the

various supporting documents to the Director of the Panel. That affidavit also

demonstrated that the Panel was kept informed of developments in the case. The

Director of the Panel confirmed receipt of the papers and of the update provided.

17. The statutory requirements which must be satisfied before a scheme of arrangement

becomes binding on the members of the company concerned (or on its creditors, as the

case may be) are set out in s. 453 of the 2014 Act. In summary, s. 453 (1) provides that

the scheme will be binding on the members of the company concerned if certain

conditions are satisfied. Those conditions are set out in s. 453 (2). They may be

(1) There must be a “special majority” of those voting at the scheme meeting voting in

favour of a resolution agreeing to the particular scheme. A “special majority” is a

majority in number representing at least three fourths in value of the members.

(2) Notice of the passing of the resolution at the scheme meeting and that an

application will be made to the court in relation to the scheme must be advertised

in at least two daily newspapers where the registered office or principal place of

18. The test which is applied by the Irish courts in considering whether to sanction a scheme

of arrangement is well established. It was recently discussed by me in a judgment

delivered on 26th November, 2019 in In Re. UBS EFTs Public Limited Company and UBS

(IRL) ETF Public Limited Company [2019] IEHC 860 (“UBS”). The classic statement of the

test is to be found in the judgment of Kelly J. in In Re Colonia Insurance (Ireland) Ltd

[2005] 1 IR 498 (“Colonia”) (which concerned a scheme of arrangement in relation to a

solvent insurance company). The test has since been applied to takeover or acquisition

schemes (such as in In Re Depfa Bank Plc [2007] IEHC 463 (“Depfa”)) and, recently, in

the case of a scheme of arrangement concerning an insolvent company (In Re Ballantyne

Re Plc [2019] IEHC 407 (“Ballantyne”)). I am satisfied that it is the appropriate test to be

19. In summary, the test requires the court to be satisfied of the following five matters,

(1) Sufficient steps have been taken to identify and notify all interested parties,

(2) The statutory requirements and all directions of the court have been complied with,

(3) The class of members or creditors, as the case may be, has been properly

(4) There is no improper coercion of any of the members (or creditors, as the case

(5) The scheme is such that an intelligent and honest person, being a member of the

class concerned, acting in respect of his or her interest, might reasonably approve

I would add that a court will not sanction a scheme of arrangement which is ultra vires

20. In my view, the evidence before the court is such that the court can be satisfied of those

five matters and I am so satisfied. I briefly explain below my reasons.

21. As regards (1), the scheme meeting was advertised as directed by the order of Haughton

J. made on 8th July, 2019 in the required publications and on the Company’s website.

The scheme circular and the relevant proxy forms were posted to the scheme

shareholders. As is usual in such schemes, there was a direction given by Haughton J. on

8th July, 2019 excusing the Company from posting the scheme circular to any scheme

shareholders in restricted jurisdictions (one such shareholder was in India and three were

in Australia, both restricted jurisdictions for present purposes). I am quite satisfied on

the evidence that sufficient steps have been taken to identify and notify all interested

22. As regards (2), a scheme meeting was advertised in accordance with the directions given

on 8th July, 2019. Notice of the passing of the resolution at the scheme meeting on 7th

August, 2019 and of the date of the sanction hearing was given in accordance with the

directions made on 27th August, 2019 and in accordance with s. 453 (2) of the 2014 Act.

23. As regards (3), as noted earlier, in his order of 8th July, 2019, Haughton J. summoned

the meeting of shareholders as a single class. The reasons for this were fully set out in

the affidavit sworn on behalf of the Company by Ms. Natasha Laird on 3rd July, 2019,

which was before Haughton J., when he made his order. The possibility of different

classes of members arising was addressed in that affidavit and was considered by

Haughton J. and ruled out at that stage. Haughton J. considered that a single class of

members was appropriate, albeit that he did so on an ex parte basis. In circumstances

where no person has appeared to contest or dispute the appropriateness of a single class

of members meeting to approve the scheme, I am of the view that the court should be

slow to reach a different view to that reached at the ex parte stage by Haughton J. I

refer in this context to, and adopt, the decision of the Court of Appeal of England and

Wales in In Re Hawk Insurance Co. Ltd. [2001] 2 BCLC 480 and, in particular, the

24. As I indicated in my judgment in UBS (at para. 23 and subsequent paragraphs), the test

in this jurisdiction for the determination as to what constitutes a proper class of members

or creditors, as the case may be, for the purposes of a scheme of arrangement is that

referred to in the judgment of Laffoy J. in the High Court in In Re. Millstream Recycling

Ltd [2009] IEHC 571. Laffoy J. in turn approved the test outlined by Bowen L.J. in the

Court of Appeal of England and Wales in Sovereign Life Assurance Co. v. Dodd [1892] 2

QB 573. A class, properly so called, consists of: “those persons whose rights are not so

dissimilar as to make it impossible for them to consult together with a view to their

25. I am satisfied, on the basis of the evidence contained in the affidavits sworn by Mr. Love

and by Ms. Laird, that a single class of members was appropriate. I agree with the

submission advanced by counsel on behalf of the Company that the fact that the directors

had given an irrevocable undertaking to vote in favour of the Scheme did not require

them to be constituted and treated as a different and separate class from the other

scheme shareholders. I note and agree with what Kelly J. stated on that point in Depfa

(at pp. 4 to 5 of his judgment). In my view, therefore, the third requirement which the

court must be satisfied (as set out by Kelly J. in Colonia) has been satisfied in the present

26. As regards (4), the court must, of course, be satisfied that there has been no coercion of

the shareholders in respect of the scheme. As I pointed out previously in Ballantyne and

UBS, every scheme, in a sense, involves an element of coercion. However, I believe that

this criterion is directed to improper coercion or pressure. No question of such coercion

has been alleged or appears to me to arise on the facts of this case. This requirement

27. As regards (5), the court must be satisfied that the Scheme is such that an intelligent and

honest person, being a member of the class concerned, acting in his or her own interest,

might reasonably approve of it. I have no doubt on the evidence that this requirement is

28. In considering this requirement, one starts with the fact that the Scheme has been

overwhelmingly supported by the scheme shareholders. 97.4% of the scheme

shareholders voting in person or by proxy and 144 out of 151 of such shareholders

29. I agree, of course, with what Kelly J. stated in Colonia and again in Depfa that the court is

not a rubber stamp but also that it will be slow to differ from experienced persons who

are familiar with the subject matter of the scheme. In my judgment in Ballantyne, I

referred to and considered many of the relevant cases on this question (see paras. 55 –

86 of the judgment in Ballantyne). It is unnecessary to repeat that discussion here. On

the basis that the authorities referred to and the principles derived from those authorities

(as discussed in Ballantyne), I am quite satisfied that this fifth requirement is met on the

facts of this application. I am also satisfied that the Scheme is fair, reasonable and

equitable for all of the reasons set out in the Mr. Love’s affidavit.

30. Accordingly, I will make an order pursuant to s. 453 (2) of the 2014 Act sanctioning the

scheme of arrangement between the Company and its shareholders (a copy of which is

set out at Appendix 1 to the originating notice of motion dated 20th August, 2019).

31. The Scheme also comprises a reduction of the issued capital of the Company in that

certain shares will be cancelled and extinguished without reducing the authorised share

capital of the Company. This was given effect to by means of a resolution passed at the

extraordinary general meeting. There is nothing in the constitution of the Company to

limit or restrict the power to reduce its capital contained in s.84 of the 2014 Act.

32. Contingently upon the reduction of capital taking effect, the issued share capital of the

Company will be increased to its former amount by the allotment of new shares equal to

the number of cancelled shares, with such new shares having the same rights as the

cancelled shares. The reserve arising in the books of account of the Company as a result

of the reduction of capital by the cancellation of the shares under the Scheme will be

capitalised and applied in paying up in full at par the new shares which will be allotted

and issued credited as fully paid to CGI. Resolutions to give effect to this were passed at

the extraordinary general meeting. The proposed reduction of the Company’s capital

does not impact on the position of creditors in any respect and is momentary. Evidence

to this effect (which I accept) is contained in Mr. Love’s affidavit.

33. It is quite common in a scheme of arrangement, such as that at issue in this application,

for the confirmation of the court to be sought under s.85 of the 2014 Act in respect of a

34. The principles to be applied by a court in exercising its discretion as to whether or not to

confirm a resolution reducing the share capital of a company under s.85 of the 2014 Act

were very helpfully set out and summarised by the High Court (Barrett J.) in In Re

Permanent TSB Group Holdings plc. [2015] IEHC 500. At para. 42 of his judgment in that

case, Barrett J. set out six factors of which the court must be satisfied before it should

“(1) In a case to which the Act of 1963 applies, the company is authorised by its articles

(2) the company duly resolved by special resolution to reduce its share capital;

(3) the reduction proposals were properly explained to the shareholders so that they

35. I am satisfied that these are the principles which I must apply in deciding whether or not

to confirm the proposed capital reduction in the present case. I will deal briefly with each

36. As regards (1), the Companies Act, 1963 does not apply in the present case. The 2014

Act applies. Under s.84 of the 2014 Act, a company may reduce its capital except to the

extent that its constitution otherwise provides. I am satisfied on the evidence that there

is nothing in the constitution of the Company which removes or limits the entitlement of

37. As regards (2), the Company did resolve by special resolution to reduce its share capital

38. As regards (3), I am satisfied that the scheme circular did fully set out and explain the

Scheme in full, including the relevant share cancellation resolution proposed at the

39. As regards (4), the reduction of share capital is for a discernible purpose, being the

implementation of the acquisition of the Company by CGI through the Scheme.

40. As regards (5), all of the scheme shareholders have been treated equally and equitably.

Each shareholder will receive the same consideration per share under the Scheme.

41. Finally, as regards (6), I am satisfied on the evidence that there will be no impact on the

42. Each of the requirements summarised by Barrett J. in Permanent TSB is satisfied in the

43. Section 85(2) of the 2014 Act requires that a company which proposes to apply to the

court for an order confirming a resolution reducing its capital must cause notice of the

passing of the resolution to be advertised and to be notified to creditors of the company.

I am satisfied on the evidence that those requirements were duly complied with by the

44. As I have explained earlier, the reduction of share capital in respect of which confirmation

is sought on this application is momentary. As was explained by Mr. Love (at para. 53 of

his affidavit), contingently upon the share cancellation resolution taking effect, the issued

capital will be brought back to its former amount by the issue of an equivalent number of

new shares from the reserve arising on the cancellation. It is clear on the evidence that

the capital reduction is one which does not in any way impact on the affairs of the

Company’s creditors as the Company will be immediately recapitalised following the

cancellation. The capital reduction is part and parcel of the scheme. For all of these

reasons, I am entirely satisfied that I should exercise my discretion to confirm the share

cancellation resolution and the consequent reduction in the capital of the Company.

45. As the proposed reduction does not involve either a diminution of liability in respect of

unpaid company capital or the payment to any shareholder of any paid-up company

capital, for the purposes of s.85(4) of the 2014 Act, and as the reduction of capital is a

momentary state of affairs and there is no impact on the position of the creditors of the

Company, I am satisfied that there is no requirement for the court to settle a list of

46. In conclusion, for all of the reasons set out in this judgment, I will (a) sanction the

scheme of arrangement between the Company and the scheme shareholders pursuant to

s.453(2) of the 2014 Act, having found that the applicable test has been satisfied and

that the scheme is fair and equitable, (b) confirm the proposed reduction of the issued

share capital of the Company pursuant to the share cancellation resolution passed at the

extraordinary general meeting of the Company, (c) order that the provisions of s.85(4) of

the 2014 Act shall not apply, (d) make the further orders set out in the draft order

provided by the Company. I will give liberty to apply.

Result: Both orders sought were approved.

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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Scisys Group PLC v The Companies Act 2014 [2019] IEHC 904 (17 December 2019) URL: http://www.bailii.org/ie/cases/IEHC/2019/2019IEHC904.html Cite as: [2019] IEHC 904

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