Bedell Cristin breaks new ground on a novel cross-border Jersey scheme of arrangement08 Jan 2013
A team from Bedell Cristin acted for Longreach Oil & Gas Limited (a Jersey company) ("Longreach") on its successful acquisition of APIC Petroleum Corporation (a Canadian company) ("APIC").
Longreach is an independent oil and gas exploration company focused on exploration and development within Morocco, traded on the TSX Venture Exchange under the symbol "LOI". Upon the conclusion of the acquisition, the undertaking, property and liabilities of APIC were transferred to Longreach and APIC was dissolved and de-listed from the TSX Venture Exchange. The TSX Venture Exchange is Canada's junior listings market, providing companies at the early stages of growth with the opportunity to raise capital.
The acquisition was structured as a scheme of arrangement under Article 125 of the Companies (Jersey) Law 1991 (the "1991 Law") and involved a novel application to the Royal Court requesting that the Royal Court exercise its jurisdiction in relation to a foreign company.
Article 125 of the 1991 Law allows the Royal Court to sanction a scheme of arrangement in relation to a "company" being a company which is incorporated under Jersey law.
The first stage of the procedure involves the Royal Court ordering a meeting of the shareholders of the "company" for the purpose of considering, and if thought fit, approving the scheme of arrangement.
At the time of APIC making an application for the court to convene a shareholders meeting, it was not a Jersey company but a Canadian company. Importantly, however, APIC intended to continue into Jersey pursuant to Part 18C of the 1991 Law. If a foreign company continues into Jersey under Part 18C of the 1991 Law, it ceases to be a company incorporated under the laws of its original country of incorporation and instead becomes a company incorporated under the laws of Jersey.
Therefore, although APIC was making an application to the Royal Court at a time when it was a Canadian company, the meeting of its shareholders pursuant to Article 125(1) of the 1991 Law would only take place when APIC had continued into Jersey and was therefore a Jersey company.
The application was considered by Commissioner J.A. Clyde-Smith In the matter of APIC Petroleum Corporation and APIC (Petroleum) Jersey Limited  JRC 228. The Commissioner held that the Royal Court had the ability to order a meeting of the shareholders of a foreign company under Article 125(1) of the 1991 Law subject to the foreign company having continued into Jersey at the time of the shareholders meeting.
At paragraph 9 of the judgment, the Commissioner commented as follows:
"An arrangement which involves a company first continuing into Jersey, is in our view but one example of the wide variety of arrangements that Article 125 of the Companies Law is intended to cover and the Court should be flexible in its approach. It was proposed that the order would be made conditional upon APIC first completing its continuance into Jersey so that the order would only become effective if and when APIC is registered under the Companies Law. The essential point is that the meeting, if and when it takes place, will be a meeting of the members of a Jersey registered company and the scheme the Court will be asked in due course to sanction … will be a scheme proposed between a then Jersey registered company and its members."
At paragraph 10 of the judgment, the Commissioner further commented as follows:
"This was not a case in which the Court was seeking to extend its reach over non-Jersey companies in an exorbitant manner; APIC had come to the Court and asked for an order conditional upon it becoming a Jersey company. We thought it appropriate to accept that invitation and to make the order."
There would normally be two separate shareholder meetings: one meeting to approve the continuance of the foreign company into Jersey and then (when continued into Jersey) a separate shareholders meeting approving the scheme.
As the Royal Court ordered a shareholders meeting in relation to a foreign company, this enabled a single shareholders meeting to be convened saving significant time on the completion of the transaction. A single shareholders meeting was convened: the shareholders approved the continuance into Jersey, the shareholders meeting was then adjourned for a short period of time to enable the completion of the continuance into Jersey and the shareholders meeting was then reconvened to approve the scheme of arrangement.
The Bedell Cristin team included banking and corporate partner, Mark Dunlop, litigation partner, Lisa Springate and banking and corporate senior associate, Malcolm Ellis. Mark Dunlop commented:
"The application demonstrates the flexibility of the Jersey courts in facilitating complex cross-border transactions. Schemes of arrangement can only be made by a Jersey company. However, the process can be initiated whilst the company is still a foreign company and in the process of continuing into Jersey. The ability to make such applications means that Jersey schemes of arrangement are an attractive option for foreign incorporated companies."
For further information, please contact Mark Dunlop or Malcolm Ellis.