The High Court has sanctioned a scheme allowing Xtrackers (IE) Public Limited Company to move participating shares from a settlement system operating through separate central securities depositories to a centralised model using Euroclear Bank and Clearstream Banking.
In an ex tempore judgment delivered on 18 June 2020, Mr Justice David Barniville approved the scheme as modified. He made lodging the scheme order with the Registrar of Companies conditional on fulfilment of an outstanding condition concerning agreements needed to implement the scheme. The judgment does not state that this condition had been fulfilled or that the order had been lodged.
The company sought sanction under section 453 of the Companies Act 2014. The scheme provides for legal interests in relevant shares to transfer to a common depository’s nominee, while beneficial interests remain with shareholders. The court heard that the change was intended to centralise settlement across multiple exchanges and address liquidity fragmentation and operational difficulties under the existing arrangement.
A first scheme meeting was held on 2 March 2020, but the directors decided not to rely on its vote after errors arose in notifying shareholders who held shares through CREST. The court directed a fresh meeting, held on 21 May. Because of Covid-19 restrictions, the court permitted remote participation where necessary and directed that attendance be limited. The requisite majorities approved the scheme at the fresh meeting.
The court recorded that 13 shareholders attended and voted in favour. It said approximately 92.3% of those voting, representing 99.964% in value by net asset value, supported the scheme. The judge was satisfied that the fresh meeting had been properly notified, statutory requirements and court directions had been met, shareholders were correctly treated as one class, and there was no improper coercion. He also found that an informed and honest shareholder could reasonably approve the scheme.
The court permitted a modification to let the court set the scheme’s effective time. The company sought the change so the transfer would take effect after trading hours on 3 July 2020. The judge concluded that the modification did not materially change the scheme or prejudice shareholders, and that shareholders did not need to vote again.
One implementation condition remained outstanding: agreements needed for the scheme, including agreements with the common depository and Euroclear Bank, were not yet in place. The company said they would be in place by the effective date. The judge said this did not prevent sanction, provided the order would not be lodged until the condition was fulfilled. He sanctioned the modified scheme on that basis and gave liberty to apply.