Approval of the scheme - mergers and winding up:
A scheme of arrangement was agreed between Hambros and Hellenic whereby the shareholders of Hellenic were to have their shares in the company cancelled in return for cash compensation. Hambros was to pay the compensation and then receive the same number of shares in Hellenic. The scheme was approved at a meeting of Hellenic by a majority in number of the shareholders holding three quarters in value of the shares involved. But a wholly-owned subsidiary of Hambros (MIT) held 53% of the shares in Hellenic and voted for the scheme. Hellenic applied for approval of the scheme and was opposed by a Greek Bank, a 14% shareholder in Hellenic. Its objections were that it wished to retain its membership and also that the cash received for its shares would be subject to heavy capital gains tax liability in Greece.
The Greek bank opposed the approval of the scheme before the court on two grounds. First, MIT as a subsidiary of Hambros had a different interest in the scheme from the other shareholders of Hellenic. MIT was Hambros indirectly; it was seeking to acquire the 47% of Hellenic which it did not (through MIT) already own. There should therefore have been a separate meeting of the holders of the 47% of Hellenic shares not already under the Hambros' control through MIT. At such a meeting the Greek bank (with 14% out of 47%) could have prevented approval by the required three quarters majority.
Secondly, the purpose of the scheme was to enable Hambros to acquire 47% of the shares of Hellenic. (The device of cancelling the shares for cash and issuing new ones to Hambros was to save the stamp duty payable on a straightforward transfer of the shares - an example of the advantages of a scheme of arrangement).
It was argued that a scheme of arrangement should not be used in a situation for which the take-over bid procedure was appropriate. Under take-over bid rules the required 90% acceptance (from the independent shareholders) would not have been obtained since the Greek bank held more than one-tenth of the outstanding 47% minority shareholdings.