The principal issue to be determined by the Inner House of the Court of Session was whether Lord Glennie was correct to hold that even if the statutory majorities had been obtained, a proposer of a solvent scheme of arrangement still had to be able to demonstrate that there was a “problem” requiring a solution or to produce evidence as to why the scheme in question had advantages for the creditors of the company, rather than merely being in the interests of the shareholders.
In allowing the appeal and overturning Lord Glennie’s judgment, the Court made clear that there was nothing in the Companies Act 2006, or any of its predecessors, that suggested that a solvent scheme ought to be dealt with any differently from an insolvent scheme. Rather, the solvency of a company was simply a factor to be taken into account when exercising the Court’s discretion as to whether to sanction a scheme. Importantly, it was also held that the existence of a “problem” was not a precondition to the sanctioning of a scheme, although it could be a factor in favour of doing so.
The appeal was granted and Lord Glennie’s decision to dismiss the petition was reversed. The case was remitted to Lord Glennie for a full hearing on whether to sanction the scheme. This hearing will also address the remaining issues regarding whether the statutory majorities were properly achieved at the creditors’ meetings.
This decision will give comfort to those who feared that Lord Glennie’s decision had threatened the continuing use of solvent schemes of arrangement. However, it remains to be seen whether the Scottish Lion scheme will in fact be sanctioned when the case comes before the Lord Ordinary at the sanction stage.
