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Issues: (i) Whether shares to be issued on conversion of stock fell within the expression "a scheme or contract involving the transfer of shares" in section 209(1) of the Companies Act 1948. (ii) Whether the proviso to section 209(1), requiring approval by holders of not less than three-fourths in number of the relevant holders, was satisfied and whether the notice to dissenting shareholders was valid. (iii) Whether the court should exercise its discretion to refuse the statutory acquisition.
Issue (i): Whether shares to be issued on conversion of stock fell within the expression "a scheme or contract involving the transfer of shares" in section 209(1) of the Companies Act 1948.
Analysis: The offer covered not only shares already in issue but also shares that would come into existence upon exercise of conversion rights. The court treated the conversion process and direct allotment to the offeror as a shortened form of the ordinary three-step process of conversion, allotment to the stockholder, and transfer onward. The statutory language was held wide enough to include a scheme involving the transfer of the right to an allotment of shares, so that the conversion shares were not excluded merely because they were not yet issued at the date of the offer.
Conclusion: The conversion shares were within section 209(1), and the offer could be counted for the statutory majority on that basis.
Issue (ii): Whether the proviso to section 209(1), requiring approval by holders of not less than three-fourths in number of the relevant holders, was satisfied and whether the notice to dissenting shareholders was valid.
Analysis: For counting the requisite numbers, the most practical date was held to be the date of the offer for shares then in issue. For conversion shares, the court treated as holders those who became entitled to shares by exercise of conversion rights during the offer period. On the evidence, the approval exceeded the required three-fourths in number after excluding the committed holdings. The prescribed notice form under the Companies (Forms) Order 1949 did not require express recital of the numerical majority, and the absence of such an addition did not invalidate the notice.
Conclusion: The proviso was satisfied and the notice to dissenting shareholders was valid.
Issue (iii): Whether the court should exercise its discretion to refuse the statutory acquisition.
Analysis: The court found no sufficient basis to refuse relief. The conversion rights were exercisable independently of the level of acceptances, and the terms of the offer did not confer any improper advantage on those whose shares arose from conversion. The circumstances did not justify intervention against the transferee company.
Conclusion: The court declined to exercise its discretion against the transferee company.
Final Conclusion: The statutory requirements for acquisition were held to be met, and the requested declaration was refused.
Ratio Decidendi: For the purposes of section 209(1) of the Companies Act 1948, a scheme or contract may include shares brought into existence through the exercise of conversion rights, and the statutory majority is to be assessed on a practical construction that captures persons who become entitled to those shares during the offer period.
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