Unanimous class consent and integral capital reduction can justify dispensing with shareholder meetings and formal reduction procedure.
Written consents of the equity shareholders, preference shareholders and unsecured creditors justified dispensing with their meetings because the affected classes had unanimously approved the proposed scheme and there were no secured creditors. Where reduction of equity share capital formed an integral part of the scheme and did not involve diminution of liability for unpaid share capital or return of paid-up capital, the court treated the shareholders' written consents as the special resolution required and dispensed with the separate capital reduction procedure and related court rules. The application was allowed at the threshold on those procedural dispensations.
Issues: (i) whether the meetings of the equity shareholders, preference shareholders and unsecured creditors could be dispensed with on the basis of written consents; (ii) whether, as the reduction of equity share capital formed an integral part of the scheme, the procedure under the provisions governing reduction of capital and the related court rules could be dispensed with.
Issue (i): whether the meetings of the equity shareholders, preference shareholders and unsecured creditors could be dispensed with on the basis of written consents.
Analysis: The applicant showed that the relevant classes of shareholders and creditors had furnished written consents approving the proposed scheme. The record also showed that there were no secured creditors. In view of the unanimous consent of the affected classes, the convening of meetings was unnecessary.
Conclusion: The meetings of the equity shareholders, preference shareholders and unsecured creditors were dispensed with.
Issue (ii): whether, as the reduction of equity share capital formed an integral part of the scheme, the procedure under the provisions governing reduction of capital and the related court rules could be dispensed with.
Analysis: The reduction of share capital was proposed as an integral component of the scheme and did not involve diminution of liability in respect of unpaid share capital or payment to shareholders of paid-up share capital. The court therefore treated the sanction of the scheme as carrying the necessary approval for reduction, and the written consents of the equity shareholders were treated as the special resolution required by law. The procedural requirements under the capital reduction provisions and the applicable court rules were consequently unnecessary.
Conclusion: The procedure under the provisions governing reduction of share capital and the related court rules was dispensed with.
Final Conclusion: The application was allowed in terms of the requested procedural dispensations for the proposed scheme and reduction of capital, and the matter was concluded at the threshold stage.
Ratio Decidendi: Where the affected classes have unanimously consented and the proposed reduction of share capital is integral to the scheme without affecting unpaid capital liability or returning paid-up capital, the court may dispense with convening meetings and with the formal reduction procedure.
TaxTMI 
AI Drafter ✕
TaxTMI 
