Re Depfa Bank plc

Factual and Procedural Background

The court was asked to consider a scheme of arrangement proposed by Company A (Hypo Real Estate Holdings A.G.) to acquire all of the issued share capital of Company B (Depfa Bank Plc). The consideration for the acquisition was to be partly in cash and partly in shares of Company A. This scheme is more complex than a previously considered scheme involving a solvent insurance company, which concerned the run-off of liabilities. The court referred to prior English and Irish authorities in relation to schemes of arrangement for solvent companies and identified five conditions to be met for approval. The proceedings included two court orders directing the process and compliance with statutory and regulatory requirements, including those under the Companies Acts, European law, competition law, and relevant financial regulators in two jurisdictions. The court was also informed of unrelated shareholder proceedings in Germany challenging the transaction, which were described as unlikely to succeed and not affecting the validity of the scheme.

Legal Issues Presented

1. Whether the court has jurisdiction to approve a scheme of arrangement in respect of a solvent company.
2. Whether the five conditions identified in the precedent case for approving such a scheme have been satisfied:
   1. Sufficient steps taken to identify and notify all interested parties.
   2. Compliance with statutory requirements and court directions.
   3. Proper constitution of classes of members or creditors.
   4. Absence of coercion in the scheme.
   5. Whether an intelligent and honest member of the class would reasonably approve the scheme.
3. Whether the existence of shareholder proceedings in another jurisdiction affects the approval of the scheme.
4. The effect of undertakings given by the acquiring company and trustee to be bound by the scheme.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by confirming jurisdiction to approve a scheme of arrangement for a solvent company, relying on established precedent. It then addressed each of the five conditions identified in the leading precedent:

• Identification and Notification: The court was satisfied that sufficient steps had been taken to identify and notify all relevant parties.
• Compliance with Statutory Requirements and Court Directions: The court noted compliance with two sets of court orders and all statutory requirements, including the Companies Acts, European law, and competition law. Regulatory bodies in both jurisdictions did not object, and the EU Commission's consent was obtained.
• Constitution of Classes: The court accepted that all shareholders formed a single class, rejecting the notion that directors with beneficial ownership constituted a separate class. It relied on legal commentary and precedent to hold that voting undertakings by directors do not create a separate class absent special benefits.
• Coercion: No issue of coercion arose in the scheme.
• Reasonable Approval by Class Members: The court found that experienced persons in the industry regarded the scheme as reasonable and approved it accordingly.

The court also considered shareholder litigation pending in Germany, concluding that it was brought late, unlikely to succeed, and would not affect the validity of the scheme. Finally, the court noted undertakings by the acquiring company and trustee to be bound by the scheme, equating these undertakings to court orders, thereby preventing any change of position before implementation.

Holding and Implications

The court APPROVED the scheme of arrangement and made orders in accordance with the proposed draft. The direct effect is to permit the acquisition of Company B by Company A under the terms set out in the scheme. No new precedent was established beyond the application of existing principles to the facts. The approval binds the parties and prevents any alteration during the implementation period due to the binding undertakings provided.