Headcount Test

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    • Pursuant to section 674(2) of the new Companies Ordinance ("the new CO"), the "headcount test" in a scheme of arrangement that involves a general offer or a takeover offer is replaced with the requirement that the votes cast against the scheme do not exceed 10% of the voting rights attached to all disinterested shares.

    • The new test that replaces the "headcount test" upholds the "one share, one vote" principle whilst at the same time provides an added safeguard to protect minority shareholders' interests.

    • For creditors' schemes and members' schemes that do not involve a general offer or takeover offer, the headcount test is retained. The Court is given a new discretion to dispense with the headcount test for a members' scheme that retains the test.

    • A dissenting member may be ordered to pay legal costs under section 676(5) of the new CO only if his opposition to the scheme is frivolous or vexatious.
    • Sections 674 and 676
    • The relevant provisions in the old Companies Ordinance (Cap. 32) ("the old Ordinance") (i.e. sections 166, 166A and 167) and the Companies (Winding-up) Rules (Cap. 32H) (i.e. rule 117) continue to apply in relation to a scheme if an application to the Court under section 166(1) of the old Ordinance is made before the commencement date of the new provisions.
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