(12.17.5) Powers of court.

The court has very wide powers in sanctioning or rejecting a scheme of compromise or arrangement. The court shall have, inter alia, the following powers:

  1. It may, at any time, after an application has been made to it under s.391, stay the commencement or continuation of any suit or proceeding against the company on such terms as it thinks fit, until the application is finally disposed of.

  2. Where an order sanctioning a compromise or an arrangement has been made, it: (i) shall have power to supervise the carrying out of the compromise or arrangement and (ii) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

  3. If the Court is satisfied that a compromise or arrangement sanctioned under s.391 cannot be worked satisfactorily with or without modifications, it may make an order for the winding up of the company on its own or on the application of any interested person.

Points to be considered by the court. The matters which the court has to consider in giving its sanction were explained by Ashbury, J. in Re Anglo Continental Supply Co. [1992]2 Ch.723 and are: (i) That the provisions of the statute have been complied with; (ii) That the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and (iii) that the arrangement is such as a man of business would reasonably approve.

A more elaborate list of such matters was drawn in the matter of Sakamari Steel & Alloys Ltd. (1987) 51 Comp. Cas.267 viz. (i) that the provisions of the Companies Act and Rules have been compiled with; (ii) that the class or classes of members and/or creditors affected by the scheme have been fairly represented by those who attended meeting(s); (iii) that the statutory majority agreeing to the proposal were acting bona fide for the benefit of all concerned and were not coercing the minority in order to promote the interests adverse to the class whom they purported to represent (iv) that the scheme is fair and reasonable and a shareholder will consider it beneficial to the company and for himself; (v) that the company really wants to save itself from liquidation and it does not want to eat up a part or whole of the principal and interest of a particular class of its creditors.