Previously the proposed Scheme ran into difficulties in the Scottish Courts when it was opposed by a group of American policyholders. The Scottish judge at first instance held that:
(i) it was open to the court to go behind the report of the chairman of the meeting on the voting, and to review the valuation of the votes cast. Depending on the outcome of the court’s review, this might cast doubt on whether the requisite majority of 75% in value had in fact been obtained; and(ii) it was not open to a solvent company to propose a Scheme of Arrangement, in the face of any opposition, in the absence of a problem requiring solution which (if unresolved) would spoil matters for everybody, unless it could demonstrate to the court advantages for the creditors, and that in those circumstances creditor democracy should not prevail.
That latter ruling was reversed by the Scottish Court of Appeal which remitted the matter back to the first instance court for a full sanction hearing, where fairness would be one of the major issues. The company was by no means certain to succeed at the sanction hearing, however the sale to Berkshire Hathaway mean these legal issues will remain unresolved.
