TMI Blog1971 (6) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... n point of time was a partly convertible stock. The amount of stock was 1,556,664 ; the convertible proportion was 30 per cent. The rate of conversion was 200 shares for 30 stock. I was told that on conversion the maximum number of shares which might have to be issued was 3,113,328. The second stock was wholly convertible. The amount of stock issued was 7,073,667. The rate of conversion was one share for 6s. stock. The maximum number of shares which might have to be issued was, therefore, 23,578,890. The potential number of new shares was accordingly 26,692,218, that is to say, considerably more than the issued shares at the offer date. The right to convert the partly convertible stock was exercisable on September 21 in each of the years 1971, 1972 and 1973. The like right in the case of the wholly convertible stock was exercisable on the same day in each of the years 1975 to 1979 inclusive. The conversion procedure in the case of each stock was as follows. Each stock certificate was endorsed with a blank form of " Notice of Con version " which had to be completed and signed by the stockholder. The notice of conversion is addressed to Simo and commences with a statement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice in writing to [Simo] within three weeks of the date of such notice to exercise wholly or partly the conversion rights attaching to their stock but without any adjustment for interest actually received : provided that on or before the expiration of the said period of three weeks the certificate or certificates for their stock with the notice of conversion endorsed thereon completed as provided in paragraph (A) of this condition are delivered to [Simo]." The offer document had the inevitable effect of invoking conditions 8(1)( xi ). The written notice required by that paragraph to be sent by Simo to its stockholders is dated March 18. The 21-day option period under that paragraph was stated to expire on April 8. I turn now to the offer document. I will read those parts which are relevant. Paragraph 1 " The offer. We hereby offer on behalf of [T. C] to acquire on the terms and conditions set out below : ( i ) all of the 16,410,274 shares of 2s. each in Simo at present in issue ; and ( ii ) all of the shares of 2s. each in Simo which may hereafter be issued as a result of the exercise, not later than April 6, 1970 (or such later date or dates as [T. C] may decide, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk Ltd., not later than 3 p.m. on April 6, 1970. Paragraph 9 detailed the action required to be taken by a Simo convertible stockholder. A stockholder was required to complete the relevant enclosed form of acceptance and transfer (pink for the partly convertible stock and blue for the wholly convertible stock) in accordance with the instructions printed thereon and to forward it together with the stock certificate, but without completing the notice of conversion printed on the stock certificate, so as to arrive at the issue department of the bank not later than the time I have mentioned. Paragraph 9 then stated that a stockholder's execution of a pink or blue form of acceptance and transfer would authorise persons nominated by Brandts, provided that the conditions in paragraph 2(B) ( a ), ( b ) and ( c ) were then fulfilled, to complete the notice of conversion printed on the stock certificate and to lodge the same with Simo in exercise of the conversion rights. If the conditions were not fulfilled, then Brandts would not so act and would return the stock certificates. There then followed this sentence : " The relevant conversion period may close as early as April 7, 1970. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Simo to be issued to me as a result of the action under para graph 2 above, and my authority to sign in my name and on my behalf to execute any further assurances that may be necessary in connection with such transfer." The paragraph, which should have been numbered 7, stated that the acceptance of the offer and signature of the form of acceptance and transfer were upon the understanding that, in the event of the offer not becoming unconditional, the stock certificate would be returned to the holder. The blue form of acceptance and transfer was in similar terms mutatis mutandis relating to the wholly convertible stock. It was a misnomer to describe the pink and blue documents as forms of transfer in the sense of share transfers. The document contained no form of share transfer because the stockholder had, at that stage, no share to transfer. Paragraph 6( b ), which I have quoted, also seems inappropriate because no share was issued to a stockholder completing a pink or blue form or was ever intended to be. As I have mentioned, the closing date of the offer was April 6, 1970, unless extended. On April 6 the secretary of T. C, on behalf of T. C , signed four forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has, within four months after the making of the offer in that behalf by the transferee company been approved by the holders of not less than nine tenths in value of the shares whose transfer is involved (other than shares held already at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiration of the said four months, give notice in the prescribed manner to any dissenting shareholder that; it desires to acquire his shares, and when such a notice is given the transferee company shall, unless on an application made by the dissenting share holder within one month from the date on which the notice was given the court thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company: Provided that where shares in the transferor company of the same class or classes as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of their value and that of the shares (othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it speaks of "a scheme or contract involving the transfer of shares or any class of shares in a company," is referring only to shares which are actually in issue at the date of the offer. Alternatively, it was submitted that the nominated shares are outside section 209 because they were allotted direct to T. C. and consequently the accepting stockholders were never shareholders of Simo in respect of the nominated shares at any point of time. If the nominated shares are excluded T. C. failed to achieve the requisite majority. Section 209, on the facts of the present case, it was submitted, requires that the scheme or contract shall involve the transfer of shares in Simo to T. C. So far as the nominated shares were concerned no such transfer ever took place or was intended to take place ; for the offer document invited stockholders to renounce in favour of T. C, not to demand an allotment and then to transfer to T. C. Further, section 209 requires that the offer shall be " approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved." It was pointed out that the stock holders who were interested in the nominated shares were nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised in the renunciations. The substitution of a nominee in the place of a person to whom, in the first instance, shares were proposed to be allotted was not a transfer of shares. It was further argued in the present case that section 209 is an expropriating section in that it confers on a company the right to acquire compulsorily the property of another person which that person desires to retain. The court ought therefore to construe the section with some strict ness. Within limits, I think that submission is right. I turn to the arguments of T. C. It was said that section 209 was designed to give effect to business considerations. The whole point of the section, it was said, which ought to colour my approach to its interpretation, was that it was designed to enable a bidder, subject to certain safeguards, to acquire a minority shareholding. The language of the section. "is admittedly not very precise. As was said in Australian Consolidated Press Ltd. v. Australian Newsprint Mills (Holdings ) Ltd. [1960] 105 C.L.R. 473, the language is commercial rather than juristic." The quotation is from the opinion of the Judicial Committee of the Privy Council in Blue Metal In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotment of shares. The telescoping of the three basic stages into the shortened two stages was merely convenient conveyancing machinery to reduce needless paper work. In my opinion it would be lamentable if the court were compelled to read section 209 in such a manner as to preclude business men from doing by two steps what they could do by three steps. I see no necessity for the narrow construction urged upon me by the applicants even in the light of the consideration that section 209 is an enactment which interferes with the property rights of another. I therefore reach the conclusion that the offer document was a scheme or contract which involved the transfer of shares notwithstanding that it embraced not only shares then in issue but also the conversion shares. I also reach the conclusion that the offer was accepted by the holders of nine-tenths in value of the shares whose transfer was involved notwithstanding that T. C. was the only registered holder of the nominated shares. A further argument was advanced by the applicants, namely, that if the conversion shares are to be taken into account for the purposes of section 209, then there ought to be taken into account a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minator of the fraction, four alternative dates were suggested in argument for counting heads : ( i )The date of the offer document. This would be a convenient date as regards shares then in issue, but is open to criticism. In the first place it has little logic because a person who is a shareholder at the date of the offer document may sell before acceptance. Such shareholder would be neither an approving nor a dissenting shareholder. He may sell to two different people; one purchaser may approve and the other may dissent. The approving shareholders could, in theory, exceed the number of persons who were shareholders at the date of the offer document. In a case where the bid was a near-run thing, the attainment or loss of the requisite three-fourths in number could be the result of pure chance unconnected with the merits of the case. ( ii )The date on which a nine-tenths majority in value is first achieved his would be an unsatisfactory choice.) The condition requires the approving shareholders to hold " not less than nine-tenths in value " and to be "not less than three-fourths in number." Suppose "share value approval" exceeded 90 per cent, and reached 95 per cent. It might ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be counted in relation to the conversion shares, which, ex hypothesi, were not then in existence. At the date of the offer no one could tell how many stockholders would seek to convert or how many of those seeking to convert would be approving or dissenting persons. Consistently with my earlier conclusion as to the ambit of section 209, I consider that I ought to treat as the holder of a share, for the purpose of calculating the denominator, not only person who was on the register of shareholders on March 16, 1970, but also a person who, during the offer period, exercised his right to convert and thus became absolutely entitled, by himself or his nominee, to receive an allotment of shares. If it is right, in relation to shares in issue at the offer date, to calculate the denominator by reference to the number of persons then holding such shares, it appears to me that it must be equally right, in relation to shares thereafter issued, to calculate the denominator by reference to the number of persons who first became entitled by the exercise of their conversion rights to be issued with shares. In the light of the foregoing conclusions I must now consider whether T. C. h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holders of not less than nine-tenths in value of the said shares (other than shares already held at the date of the offer by or by a nominee for the transferee company or its subsidiary)." The argument in the present case is that where the proviso applies so that a three-quarters majority in number is required as well as a nine- tenths majority in value, " circumstances require " that the scheduled form of notice shall be varied by referring not only to the attainment of the requisite majority in value, but also to the attainment of the requisite majority in number. I would see the force of an argument that in a case where the proviso is relevant, the statutory instrument should prescribe a form of notice which refers to the attainment of both majorities. But the fact remains that the prescribed form of notice is silent on majorities save in regard to the majority in value, and there is no direction that the attainment of the numerical majority must, in any circumstances, be mentioned. It seems to me that the statutory instrument would be a trap if this "Information was necessary but the statutory instrument was completely silent about it. I therefore conclude that such addit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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