Jersey Unreported Judgments

Companies - reasons for sanctioning a Scheme of Arrangement

[2025]JRC004

Royal Court

(Samedi)

6 January 2025

Before     :

R. J. MacRae, Esq., Deputy Bailiff, and Jurats Le Heuzé and Opfermann

 

IN THE MATTER OF THE REPRESENTATION OF CENTAMIN PLC

AND IN THE MATTER OF ARTICLES 125 & 126 OF THE COMPANIES (JERSEY) LAW 1991 (AS AMENDED)

Advocate J. W. Angus for the Representor.

Advocate S. Alexander for AngloGold Ashanti Plc.

judgment

the deputy bailiff:

Background

1.        On 20 November 2024, we sanctioned a Scheme of Arrangement pursuant to Article 125 of the Companies (Jersey) Law 1991 ("the Law").  We now give our reasons for so doing. 

2.        Centamin Plc ("the Company") is a company incorporated in Jersey on 10 October 2011.  It is an established gold producer with its most significant asset being a gold mine in Egypt.  It also has similar assets in other jurisdictions.  The Company is listed on the main market of the London Stock Exchange.  It is also listed on the Toronto Stock Exchange.

3.        At the Scheme Voting Record Time, as defined in the Scheme documentation on 24 October 2024, the Company had 2,106 shareholders who were all Scheme Shareholders, as defined, and 1,161,082,695 shares in issue.

4.        The purchasing entity, AngloGold Ashanti Plc, is a public company incorporated in the United Kingdom and is part of the wider AngloGold Ashanti Group which is headquartered in Denver, Colorado.  AngloGold Ashanti Plc's ("the Bidder") shares are publicly traded on the New York Stock Exchange, the Johannesburg Stock Exchange, another South African Stock Exchange and the Ghana Stock Exchange.  The Bidder is also a company specialising in gold mining. 

5.        In summary, the Scheme provided that the Bidder purchase the Scheme Shares in exchange of, for each share, 0.06983 shares in New AngloGold Ashanti and $0.125 in cash which represented a 37.6% premium on the thirty day volume weighted average share price per Company share as at 9 September 2024, based on a thirty day volume weighted average share price of the Bidder at the same date.  This implied that the Company's entire issued and to be issued share capital was valued at approximately £1.9 billion or (equivalent) $2.5 billion.

6.        Immediately following completion, it was anticipated that existing shareholders in the Bidder would own 85% of that company and shareholders in the Company would own approximately 16.5% of AngloGold Ashanti Plc's enlarged issued share capital with shareholders in the Company benefitting from a cash return and, it was said, ongoing participation in a larger and more diversified combined group with an enhanced profile in the capital markets and greater trading liquidity.

7.        The New AngloGold Ashanti shares would be fully paid and rank pari passu in all respects with existing AngloGold Ashanti shares.

8.        As the Company is listed on the LSE, the acquisition of the Scheme Shares by the Bidder was governed by the City Code on Takeovers and Mergers.  Accordingly, the Scheme is implemented in accordance with the rules and principles of the Code and under the supervision of the UK Panel on Takeovers and Mergers.  The Code is designed to ensure, inter alia, that shareholders in an offeree company are treated fairly and afforded equal treatment by the offeror. 

Legal Principles

9.        The legal path to sanction of schemes in Jersey is well trodden by this Court.

10.     Article 125 of the Law provides:

"125 Power of company to compromise with creditors and members

(1) Where a compromise or arrangement is proposed between a company and its creditors, or a class of them, or between the company and its members, or a class of them, the court may on the application of the company or a creditor or member of it or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members (as the case may be), to be called in a manner as the court directs.

(2) If a majority in number representing -

(a) 3/4ths in value of the creditors or class of creditors; or

(b) 3/4ths of the voting rights of the members or class of members,

as the case may be, present and voting either in person or by proxy at the meeting, agree to a compromise or arrangement, the compromise or arrangement, if sanctioned by the court, is binding on -

(i) all creditors or the class of creditors; or

(ii) all the members or class of members,

as the case may be and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

(3) The court's order under paragraph (2) has no effect until the relevant Act of the court has been delivered to the registrar for registration; and the relevant Act of the court shall be annexed to every copy of the company's memorandum issued after the order has been made.

(4) If a company fails to comply with paragraph (3), it is guilty of an offence."

11.     The approach was recently considered by the Royal Court in the case of Representation of Wentworth Resources Plc [2024] JRC 020, where the Court said:

"9. As to the matters that the Court need to consider, in Vallar Plc [2011] JRC 125, Sir Philip Bailhache, Commissioner, giving judgment of the Court in a similar application said, having set out the terms of Article 125:

           "5. In exercising its discretion under Article 125 the Court has followed the settled approach of English courts. We have to ask ourselves:-

           (i) Whether the provisions of the 1991 Law have been faithfully observed;

           (ii) Whether the shareholders or class of shareholders or creditors have been fairly represented by those who attended the meeting and that the statutory majority approving the scheme was acting in good faith in the interests of the class it professed to represent and was not coercing the minority in order to promote interests adverse to those of the class whom they purported to represent;

           (iii) Whether the arrangement was such as an intelligent and honest man, a member of the class concerned and acting in respect of his interest might reasonably approve; and

           (iv) Whether viewing matters in the round there was no blot on the scheme which might indicate that the Court's discretion should not be exercised in favour of sanctioning the scheme of arrangement."

10. Subsequent cases have noted that the first matter, namely whether or not the provisions of the 1991 Law have been faithfully observed, is not in fact a matter of discretion. It is simply a matter of whether or not the evidence shows that the statutory provisions have been complied with. The Court does not exercise a discretion unless there has been observance with the statutory conditions. Subsequently, in the case of The Representation of Cazenove Capital Holdings Limited [2013] JLR (2) N-18, Commissioner Clyde-Smith, giving the judgment of the Court, suggested that the final consideration, namely whether or not there was a blot on the scheme which might indicate that the Court's discretion should not be exercised in favour of sanctioning the scheme, should be treated as part and parcel of the previous question, namely whether or not the arrangement was such that an intelligent and honest man, a member of the class concerned and acting in respect of its interests might reasonably approve.

11. This approach was considered by the Guernsey Court of Appeal in Puma Brandenburg Limited v Aralon Resources and Investment Company Limited [Judgment 18 May 2017], the Court consisting of Nigel Pleming QC, George Bompas QC and Sir Michael Birt. The judgment of the Court was given by Bompas JA and at paragraph 80, having considered the Court's jurisdiction to sanction the scheme, went on to deal with the issue of the Court's discretion. Bompas JA said:

           "81 At paragraphs 34 and 35 of his judgment the Bailiff set out the principles which guide the exercise of the discretion given by section 110 of the Companies Law when the Court is considering whether or not to sanction a scheme. These he explained in the following terms:

                       "34. By virtue of section 110(1) of CGL, [the relevant Guernsey legislation] when deciding whether to approve a scheme of arrangement, the Court has an unfettered discretion but, as always, the discretion must be exercised judicially. The factors to be considered in the exercise of discretion include, but are not limited to, those set out in section 110(2) of CGL. In Re Montenegro Investments Limited (In Administration) [2013-14] GLR345 and in Re Assura Group Limited (unreported 27th January 2015), the Royal Court has set out the following criteria as matters which must be established by the applicant Company to the satisfaction of the court:

                       (1) Whether the class of members was fairly represented by those who attended the court meetings and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interest adverse to those of the class whom they purport to represent;

                       (2) The scheme is such that an intelligent and honest man, a member of the class concerned and acting in respect of his interests, might reasonably approve; and

                       (3) There is no 'blot' on the scheme, which it is submitted is simply another way of saying that the court may take any other factor into account in exercising its discretion.""

12. The Guernsey Court of Appeal considered the Jersey decision in Cazenove, and the appropriate test in the light of that decision as follows:

           "85 Nevertheless, before us Advocate Greenfield made two submissions about the last of the principles referred to by the Bailiff in his judgment. His first submission was based on a judgment given in a case in the Royal Court in Jersey, namely Re the Representation of Cazenove Capital Holdings Ltd [2013] JLR(2) N-18 (Commissioner Clyde-Smith sitting with Jurats Clapham and Blampied). In that case the Court said it preferred to regard that third principle as falling within the second. What was said at paragraph [9] of the judgment was as follows:

                       "In Re Vallar PLC [2011] JLR N25 the Court suggested that there was a fourth issue to consider, namely whether, viewing matters in the round, there was any blot on the scheme which might indicate that the Court's discretion should not be exercised in favour of sanctioning the scheme. We entirely agree that, if there were such a blot, that would be a highly material factor; but we think that this topic falls naturally for consideration under heading (iii) above. If there is such a blot, it would suggest that the arrangement is not such that an intelligent and honest man might reasonably approve. Accordingly, we would prefer to see the test on such applications continue to be expressed in its traditional three pronged form, but always accepting of course that the matter is ultimately one for the discretion of the Court having regard to all the circumstances of the scheme, including whether there is a blot of some sort which would suggest that (iii) is not satisfied."

           86 Based on this, Advocate Greenfield submitted that in the present case all that matters was the voting at the scheme meetings looked at in the light of the first principle, and the fairness of the scheme measured by the test set out in the second principle.

           87 In the Re Assura case referred to in the Bailiff's judgment the Deputy Bailiff had considered and rejected just this submission. He said, "I am satisfied that because the provisions on the face of the 2008 Law reflect those of the 2006 Act ... we can properly take guidance from England and Wales and treat the blot aspect as being a fourth consideration". In referring to "the blot aspect as being a fourth consideration", the Deputy Bailiff was concluding that one of the principles guiding the exercise of the discretion is that "there must be no blot on the scheme". In our judgment the Deputy Bailiff's conclusion was correct, and amply supported by English authority concerned with the Court's jurisdiction to sanction schemes of arrangement. The reason he referred to it as a "fourth consideration" is because there is a threshold, first, consideration which is not part of the exercise of any discretion: this is, rather, that the occasion for the exercise of the discretion must have arisen because the statutory requirements have been complied with.

           88 Advocate Greenfield's second submission was that the Bailiff's exposition of the principles concerning the absence of any blot on the scheme was mistaken. According to Advocate Greenfield, the Bailiff was wrong to direct himself that the Court's being satisfied that there was no blot on the scheme was another way of saying that "the court may take any other factor into account in exercising its discretion".

           89 We reject this second submission. In our judgment the third of the principles is that in exercising the discretion the Court needs to be satisfied that the scheme is appropriate to be sanctioned: the Court must be satisfied that there is nothing about the scheme which makes it oppressive of, or unfairly prejudicial, to persons who may be bound or affected by it. This, in modern terms, is what is encapsulated by saying that there must be no "blot" on the scheme."

13. We agree with this approach. We agree with the Guernsey Court of Appeal that the first matter for consideration is a threshold consideration which does not form part of the exercise of any discretion - the occasion for the exercise of discretion will only arise if the statutory requirements have been complied with. At that stage, the second, third and fourth matters referred to by Sir Philip Bailhache in the Vallar case fall to be considered in the exercise of the Court's discretion so that the Court is satisfied that the scheme is appropriate to be sanctioned. We were not referred to authorities on what may amount to a "blot", but having regard to the generality of the language used by the Royal Court in Vallar, in our view the Court has a wide discretion which must extend beyond considering the matters referred to at paragraph 5(ii) and 5(iii) in Vallar when considering whether there is a "blot" on the scheme which indicates that the Court should not sanction it."

Application of the principles in this case

12.     With these principles in mind, we now turn to consider whether or not there has been compliance with the steps required for the Court to sanction the Scheme.

13.     On 26 September 2024, the Royal Court ordered that the Company convene a meeting of the Scheme shareholders in Jersey on 28 October 2024, for the purpose of considering and, if thought fit, approving the Scheme.  The Court made various other ancillary orders and also ordered, in accordance with the statutory provisions, that:

"upon it being approved by a majority in number of the Scheme Shareholders present and voting either in person or proxy, at the Jersey Court Meeting or at any adjournment thereof representing 3/4s or more of the voting rights of the Scheme Shares voted by those Scheme Shareholders, the Representor shall seek the Royal Court's approval of the Scheme of Arrangement at the adjourned on the 20^th November 2024 or such other date as the Court thinks fit."

14.     The orders made by the Royal Court on 26 September 2024 were complied with, as proved by the evidence filed for the purpose of the hearing on 20 November 2024.  It is not necessary for us to detail the steps which were taken to ensure compliance with the orders as they are comprehensive in nature.  The Court Meeting was followed by an Extraordinary General Meeting of the shareholders of the Company in order to make various amendments to the Company's Articles of Association resulting from the Scheme.  It is not necessary for us to consider those amendments.

15.     As to the Court Meeting, a total of 63.72% of the Scheme Shares were voted.  Of those, 62.5% or 98.08% of those voting voted in favour of the Scheme.  This plainly exceeds the three-quarter majority requirement provided for in statute.  Further, of the 121 Scheme Shareholders who voted, 94 voted in favour and 27 against which satisfies the statutory requirement of a bare majority.

16.     We were advised that 11 Scheme Shareholders voted both for and against the Scheme.  This was explained to us at the hearing as a function of the fact that some shares were held by nominees who voted the block of shares they held as to a certain proportion in favour and as to a certain proportion against the Scheme, in accordance with the wishes of the beneficial owners of the shares in question.

17.     In the circumstances we concluded that the provisions of the Law had been faithfully observed.

18.     Counsel for the Company was unable to explain to the Court why it was that 27 shareholders holding 1.22% of the shares voted against the Scheme as there had been no correspondence received from any of the shareholders who voted against explaining why they had voted the way they did.  It would be a matter of speculation to attempt to ascertain why this small minority of Scheme Shareholders voted against the Scheme.  None of the Scheme Shareholders who voted against the Scheme attended the Court Meeting.  As directed by the Court on 26 September, there was a single class of shareholders and we accept the submission made on behalf of the Company that there is nothing to suggest there was any coercion of any shareholder.  We also accept the submission, having regard to recent cases of a similar nature, that the shareholder turnout in this case was a comparatively high one, which can be regarded as strong evidence that the shareholders in the Company were fully informed about the Scheme and fairly represented at the Court Meeting.

19.     We concluded that the class of shareholders had been fairly represented by those who attended the Court Meeting and that the statutory majority approving the Scheme was acting in good faith in the interests of the class it professed to represent and that there was no coercion of a minority in order to promote interests adverse to those of a class whom they purported to represent.

20.     Further, we concluded that the Scheme was such that an intelligent honest person, a member of the class concerned and acting in respect of their interests might reasonably approve the Scheme and that there was no factor present which the Court should take into account in exercising its discretion so as to withhold its consent to approving the Scheme.  The Scheme was approved by an overwhelming majority of shareholders who voted at the Court Meeting and the Court should be very slow to reject the views of the majority in these circumstances.  It is just and reasonable for the decision of the shareholders to be respected in circumstances such as these.

21.     We note as set out above that the acquisition is governed by the Code and subject to the jurisdiction of the Panel.  Counsel for the Bidder attended to advise the Court that AngloGold Ashanti Plc consented to the Scheme, agreed to be bound by it and agreed to execute all matters required to be done to implement the Scheme.  He also confirmed that all conditions precedent had now been satisfied or waived.  Further, he specifically agreed to submit to the jurisdiction of the Royal Court for enforcing the undertakings he had given in respect of the Scheme.

22.     A final matter that we need to address is a matter which arises by virtue of a provision of the United States Securities Act 1933 ("The Securities Act"), a matter in which we were assisted by the affidavit of Thomas Vita, an Attorney-at-law admitted to the Bar of the State of New York.  Under Section 5 of the Securities Act, the exchange of Scheme Shares for ordinary shares of AngloGold Ashanti Plc by Scheme Shareholders resident in the United States in accordance with the Scheme would be unlawful unless the exchange complied with registration requirements of the Securities Act and the rules and regulations promulgated thereunder, or was exempt from, or not subject to, such registration requirements. 

23.     The New AngloGold Ashanti shares that are to be issued in accordance with the terms of the Scheme have not been, and will not be, registered under the Securities Act. 

24.     The Scheme document explains to the Company's US shareholders that the new shares to be received by the Scheme Shareholders in exchange for their shares in the Company pursuant to the acquisition have not been and will not be registered under the Securities Act in reliance upon the exemption from registration requirements in the Securities Act provided by section 3(A)(10) thereof. 

25.     Section 3(A)(10) of the Securities Act provides for an exemption from the requirement of registration under the Securities Act for:

"Any security which is issued in exchange for one or more bona fide outstanding securities, claimed or property interest....where the terms and conditions of such issuance and exchange are approved, and after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court... or other governmental authority expressly authorised by law to grant such approval."

26.     A bulletin issued on 18 June 2008 by the US Securities and Exchange Commission ("SEC") provided, inter alia, that:

"A court...must approve the fairness of the terms and conditions of the exchange."

27.     And that: "the reviewing court...must...find, before approving the transaction, that the terms and conditions of the exchange are fair to those to whom securities will be issued; and be advised before the hearing that the issuer will rely on the Section 3(A)(10) exemption placed on the court's...approval of the transaction".

28.     All Scheme Shareholders were entitled to appear at the hearing before the Royal Court at which the Court was invited to sanction the Scheme and were notified of their right to do so on several occasions in the material provided to them in accordance with the order made by the Court on 26 September.

29.     The affidavit of Thomas Vita specified the requirements of the SEC bulletin and made aware of the terms of Article 3(A)(10) of the Securities Act.  The Court understands that reliance is placed on the Section 3(A)(10) exemption with respect to US shareholders who will be exchanging their Scheme Shares for New AngloGold Ashanti Plc shares and, in accordance with the findings that the Court has found it necessary to make for the purpose of Article 125 of the Law, it is axiomatic that the Court has found that the terms of the Scheme are fair to those to whom securities will be issued and that the terms of the Scheme as a whole are fair.

30.     We understand that the terms upon which the US shareholders hold and receive their New AngloGold Ashanti Plc shares will not be adversely affected in that they will, in the usual way, be registered either directly or via a nominee as shareholders in AngloGold Ashanti's records.

31.     As to the Company, henceforth it will be wholly owned by the Bidder and will become a private company.

32.     In the circumstances, having regard to the submissions we heard from counsel and the material available to us together with the undertaking given by the Bidder to be bound by the Scheme, we had no difficulty in sanctioning the Scheme of Arrangement pursuant to Article 125(2) of the Law.

Authorities

Companies (Jersey) Law 1991.

Representation of Wentworth Resources Plc [2024] JRC 020