The High Court sanctioned a scheme allowing FundLogic Alternatives Public Limited Company to move settlement for eight exchange traded funds from the CREST system to an international centralised securities depositary model.
Mr Justice David Barniville delivered the judgment on 19 August 2020, after hearing the company’s application that day. He said the scheme was fair and equitable and met the requirements for court sanction under section 453(2) of the Companies Act 2014.
The scheme transfers legal title to the participating shares from the existing registered shareholders to Citivic Nominees Limited, acting as nominee of Citibank Europe plc, the common depositary. The beneficial interests remain with investors. The judgment said investors’ beneficial entitlements to the same number of shares in the same funds would continue.
FundLogic said the change was needed because, after the Brexit transition period in March 2021, it would no longer be able to use the existing settlement model for EU-domiciled exchange traded funds. The company’s evidence was that the replacement model was expected to streamline settlement, reduce inventory requirements and settlement risk, and improve foreign exchange functionality.
The eight funds covered by the scheme were listed on the London Stock Exchange. They comprise the MS Scientific Beta Global Equity Factors UCITS ETF; MS Scientific Beta US Equity Factors UCITS ETF; SciBeta HFE EM Equity 6F EW UCITS ETF; SciBeta HFE Europe Equity 6F EW UCITS ETF; SciBeta HFE US Equity 6F EW UCITS ETF; SciBeta HFE Japan Equity 6F EW UCITS ETF; SciBeta HFE Pacific ex-Jap Equity 6F EW UCITS ETF; and SciBeta HFI US Equity 6F EW (USD) UCITS ETF.
The process had to be reconvened after the court was told that the company’s administrator had no operational relationship with the originally proposed depositary, and that some members who were not scheme shareholders had not received notice of the extraordinary general meeting. Fresh directions were made, and the meetings were held on 24 July 2020. Both were quorate, and the scheme was unanimously approved.
The judge found that interested parties had been notified, statutory requirements and court directions had been met, and the shareholders had properly voted as one class. He also found no improper coercion and concluded that an intelligent and honest member of the class could reasonably approve the scheme. The Central Bank of Ireland had raised no objection, according to the judgment.
The court made the sanction order on 19 August and related orders, including that the scheme would take effect at 11.59pm Irish Standard Time on 4 September 2020. The company was given liberty to apply.