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2025 IEHC 768

1 THE HIGH COURT COMMERCIAL [2025] IEHC 768 2025 No. 320 COS 2025 No. COM IN THE MATTER OF DALATA HOTEL GROUP PUBLIC LIMITED COMPANY AND IN THE MATTER OF THE COMPANIES ACT 2014 AND IN THE MATTER OF A PROPOSAL FOR A SCHEME OF ARRANGEMENT PURSUANT TO SECTIONS 449 TO 455 OF THE COMPANIES ACT 2014 AND IN THE MATTER OF A PROPOSED REDUCTION OF CAPITAL PURSUANT TO SECTIONS 84 TO 86 OF THE COMPANIES ACT 2014 AND IN THE MATTER OF THE IRISH TAKEOVER PANEL ACT 1997 Ex Tempore JUDGMENT of Mr Justice Mark Sanfey delivered on the 29th day of October 2025. 1. This is an application by Originating Notice of Motion of 16th of September 2025 by which Dalata Hotel Group plc (“the company”) seeks relief pursuant to section 453

(2)2 (c) of the Companies Act 2014 (as amended) (the “Act”) sanctioning a proposed scheme of arrangement between the company and the shareholders of the Scheme Shares, and the Scheme is set out part IV of the Scheme Document that was sent to the company's shareholders on the 12th of August
  2. Effectively, the Scheme operates to effect a takeover of the company by Pandox Ireland Tuck Limited, which is referred to throughout in the papers as Bidco, of the entire issued and to be issued share capital of the company by what is generally referred to as a cancellation scheme -- that's a reduction of company capital by the cancellation of the Scheme Shares and the immediate issue of an equivalent number of shares to Bidco. This means that there will effectively be an application also for the reduction of share capital pursuant to sections 84 to 86 of the 2014 Act.
  3. The matter was admitted to the Commercial List by me on the 6th of October 2025 on foot of a very comprehensive grounding affidavit by Mr Dermot Crowley, who is the CEO of the company, and he set out the rationale in that affidavit for the application and emphasised the fact that the Dalata Group faces certain structural challenges, including its relatively small scale in the public market context, its relatively concentrated shareholder register, constrained capital base in the context of its growth ambition, and a share price that before the strategic review traded at levels at which the Dalata Board does not believe reflect the asset base, fundamentals, performance, cash generation and exciting growth prospects of Dalata.
  4. So, Dalata appointed Rothschild & Co as its financial advisor. A strategic review was announced on the 6th of March
  5. This culminated in a formal sale process to solicit possible offers for the Dalata Group. Essentially, this ended up with the consortium of the two companies who have formulated Bidco making an offer for the shares on 15th July
  6. The board of directors of the company and Bidco jointly announced in 3 accordance with the rule 2.7 of the Takeover Rules that they had reached agreement on the terms of an unanimously recommended cash offer by Bidco pursuant to which Bidco would acquire the entire issued and to be issued share capital of the company for €6.45 per Scheme Share.
  7. This required then, following the procedures set out in Section 450 and the following sections of the Act, that there had to be a meeting of the holders of the Consortium Shares and a meeting of the Independent Dalata shares. This required a consideration of what the appropriate scheme meetings would be and I'll come back to that later. But the scheme meetings were held sequentially on the 11th of September
  8. Each scheme meeting required a special majority as defined in the Act.
  9. The Consortium obviously voted 100% in favour of the Scheme and at the second meeting there was a vote of 99.87% of the votes cast by the Independent Dalata Shareholders. Subsequently, an EGM was held at which the company's shareholders resolved inter alia to approve the Scheme on behalf of the company and to reduce the company's capital by the cancellation of the Cancellation Shares.
  10. Ms Smith S.C. has outlined in her submissions the nature of the Scheme and the way it's to operate. Essentially, there are to be Cancellation Shares and Transfer Shares, and the Scheme will apply to all of the shares in the company other than so-called Excluded Shares, which are shares beneficially owned by Bidco or treasury shares, and the Cancellation Shares, assuming that the application for reduction of capital is successful, will be cancelled under the Scheme and the Transfer Shares will transfer to Bidco. Essentially, the issue of the new Dalata shares is to be from the reserve arising on the cancellation of the Cancellation Shares and no capital is being returned to the members, but rather there is a simple momentary reduction of capital that has no impact on the company's creditors. 4
  11. The Court's jurisdiction to sanction a scheme of arrangement is set out under section 453 of the Act and various conditions are set out which have to be satisfied in order for the scheme of arrangement to be capable of being sanctioned by the Court, and those criteria were examined in two decisions of this Court in particular, the In Re Colonia Insurance (Ireland) Limited1 case by Mr Justice Kelly, as he then was, and the Re Allergan PLC2 case, a decision of Mr Justice Barniville, as he then was. There are five steps which have to be complied with by the company of which the Court has to be satisfied on the application of the company, and they're as follows.
  12. The Court must be satisfied that sufficient steps have been taken to identify and notify all interested parties. I've had extensive affidavit evidence of that, and an affidavit of James Mahony of Computershare Investor Services Ireland Limited and Mr Andrew Styles of Innovative Print Solutions Limited who have set out the steps they took on the instruction of the company's solicitors to disseminate hard copies of the Scheme to various shareholders at the appropriate time, and I'm satisfied that they've done that and that the relevant members have been identified and notified in advance of the scheme meetings and of the EGM.
  13. Secondly, the Court has to be satisfied that the statutory requirements and all directions of the Court have been complied with. Once again, I'm satisfied that the quorum requirements in relation to the meetings have been satisfied and that a special majority resolution has been duly passed in respect of the Scheme and the AGM.
  14. The third is the question of class composition, and this took up a certain amount of space in Mr Crowley's affidavit and indeed, in the legal submissions explaining how the class compositions came to be arrived at. Clearly, the Consortium Shareholders who 1 2 Re Colonia Insurance (Ireland) Ltd [2005] 1 IR
  15. Re Allergan Plc [2020] IEHC
  16. 5 are making the offer form a separate class, but the question really arose as to whether or not there should simply be one class of Independent Dalata shareholders or whether there should be a number of classes to deal with the various circumstances which apply to various shareholders. The tests are fairly clearly set out in the case law. Once again, the Allergan case, a decision of Mr Justice Barniville, deals with that, and Mr Justice Barniville identified that the leading statement on the question of classes of meetings for present purposes is that made by Lord Justice Bowen in the Court of Appeal in the Sovereign Life Assurance Company v Dodd3 case in 1892, and in a classic phrase, the judge in that case said that: "It must be confined to those persons whose rights are not so dissimilar as to make it impossible for them to consult together with a view to their common interest." Mr Justice Barniville, having cited that test, went on to say that the test was approved in this jurisdiction by Ms Justice Laffoy in the Millstream Recycling4 case, and also approved and applied by him in a number of other cases, and he then said the proper focus is on the legal rights possessed by the members of the company.
  17. If those rights are not so dissimilar as to make it impossible for the members to consult together with a view to their common interest, then it is appropriate to treat the members as a single class. In relation to Allergan, having gone through the various possible permutations in that case, Mr Justice Barniville said: "I am satisfied that the company is correct in its contention that separate classes were not required. Each of those groups is treated in the same way as other members or interest holders under the scheme and will receive precisely the 3 4 Sovereign Life Assurance Company v Dodd [1892] 2 Q.B.
  18. Re Millstream Recycling [2010] IEHC
  19. 6 same consideration. Members of the Company are therefore being treated in the same way by the scheme. There is not merely a similarity, but an identity of rights involved."
  20. Now, the grounding affidavit and the submissions then went through the various possible permutations and examined the position of various different types of shareholders; for instance, the Dalata Clog Scheme shareholders, where certain of Dalata's executive directors were required to retain a significant stake in Dalata to incentivise them to deliver value creation over time, and effectively an agreement was arrived at with Bidco whereby there would be compensation of the participants in the Dalata Clog Scheme for any income tax and pay related social insurance liability that would arise as a result of early termination of shares. The employee shareholders: effectively Bidco has agreed that for a period of 18 months following the effective time, Dalata employees’ existing rights in respect of salary levels, employee benefits, severance terms, annual cash incentive and long-term incentive opportunities will be preserved and no detrimental changes will be made to such rights and/or other employment terms. Effectively, those are matters separate from the issue of shareholding in any event.
  21. There are also then the Dalata long-term incentive plan shareholders. In that case, there was a meeting of Dalata Remuneration Committee on the 30th of September 2025, and that Committee utilised its discretion conferred by the pre-existing rules of that Scheme to accelerate in full any time-based vesting conditions of Dalata awards and determined the vesting of the performance-based Dalata awards under the Dalata LTIP. So, all vested Dalata awards will as a part of the acquisition convert into Dalata shares, and the shares will be acquired pursuant to the acquisition in exchange for the consideration payable to all shareholders pursuant to the acquisition. 7
  22. There are other de minimis shareholders which are addressed, and effectively the position is summarised in paragraph 48 of the written submissions which says that: "In summary, all of the Independent Dalata Shareholders, in their capacity as members of the company, are treated in the same way under the Scheme. Having considered various groupings of shareholders, the company considered that the rights of the Independent Dalata Shareholders arising from the Scheme are sufficiently similar that they may consult together with a view to their common interest and that they were properly included within a single class and given notice of the second scheme meeting." Having considered the evidence in the affidavits before me, I think that that conclusion is valid and I'm satisfied that the classes of shareholders were properly constituted.
  23. The fourth criterion is whether the issue of coercion arises. There's no suggestion of that, and nobody has turned up to make a case that they were coerced into agreeing with this or that there was coercion exercised on any of the classes of shareholders.
  24. Finally, the Court must be satisfied that that the scheme of arrangement is such that an intelligent and honest person, a member of the class concerned acting in respect of his or her interests might reasonably approve of it, and once again, the law is clear in this regard. Mr Justice Barniville in Re Ballantyne Re5 referred to the dicta of a judgment of Parker J in the Grand Court of the Cayman Islands, setting out certain principles which Mr Justice Barniville then adopted. The point is made that the sanction of the Court is not a mere formality, although the Court has an unfettered discretion as to whether or not to sanction a scheme.
  25. And then the very valid point is made that members and creditors are normally the best judges of what is in their commercial interest and are in a better place than the Court to 5 Re Ballantyne Re plc [2019] IEHC
  26. 8 decide where their best interests lie. The test is not whether the opposing members or creditors have reasonable objections to the Scheme, because a member or creditor may be equally reasonable in voting for or against the Scheme. The Court can sanction the Scheme, notwithstanding that there are members or creditors who sincerely contend that the Scheme is unfair.
  27. The Court is not however bound by the decision of the meeting. A favourable resolution merely represents a threshold which must be surmounted before the sanction of the Court can be sought. Parliament envisaged that the Court's discretion whether or not to sanction would be a check or balance on the power of the majority to bind the minority. I suppose the factors which would tend to predispose the Court to hold that it was satisfied that the scheme of arrangement is such that an intelligent and honest person, a member of the class concerned acting in respect of his or her interests might reasonably approve of it, would be the fact that there was overwhelming and almost complete agreement of the Independent Dalata Shareholders in respect of the Scheme. I've also taken into account the very long and cogent explanation by Mr Crowley in his affidavit of the reasons why the board has decided to accept this offer. I'm not going to reiterate them now, but the reasons are convincing, and they're backed up by the overwhelming support of the shareholders as expressed in the scheme meetings and in the EGM. Also, finally, nobody has turned up here to say that there is a problem or that an intelligent person wouldn't have voted in favour of this. The opportunity for shareholders to do so was at the scheme meetings and at the EGM and that didn't occur. So, I am satisfied that all of the five criteria identified in the Colonia case have been complied with and that the Court can be satisfied in relation to the various criteria set out in that case.
  28. Now, as we know, the Scheme requires that there be a reduction of capital and indeed a cancellation of what are called the Cancellation Shares, and the principles underlying 9 whether or not a Court should approve a reduction of share capital were set out by Mr Justice Barrett in the Permanent TSB Group Holdings plc6 case, and those criteria were approved by the Court of Appeal subsequently in that case.7 And once again, to run through those criteria briefly, the company has to be authorised by its articles of association to resolve to reduce its capital. In fact, the situation under the 2014 Act, which didn't apply at the time of the Permanent TSB case, is slightly different in that section 84 now provides that a company may reduce share capital except to the extent that its constitution otherwise provides. There's nothing in the constitution of Dalata that removes or limits this entitlement, and I think in fact anyway, in any event, one of the resolutions of the EGM specifically empowered the company to reduce its capital. The second criterion is that there was a resolution to reduce its share capital. That was done. The Court has to be satisfied that the Scheme document fully set out and explained the acquisition of which the share capital reduction forms part -- well, that certainly is the case. The reduction of share capital must be for a discernible purpose; well, clearly, it's an essential mechanism in the Scheme to cancel the shares, so that is satisfied. All of the shareholders must be treated equitably. Well, they have been treated equitably. They've all been treated the same effectively, and once again, the votes at the scheme meetings show the extent to which the shareholders themselves are satisfied that they've been treated equitably. And the last criterion is that the creditors of the company are safeguarded. That doesn't arise in the present case because the Scheme effectively makes no difference to the creditors. They've the same rights as they had before. 6 7 Re Permanent TSB Group Holdings plc [2015] IEHC
  29. Re Permanent TSB Group Holdings plc [2020] IECA
  30. 10 Conclusion I'm satisfied that the orders which have been sought by the company should be made. I've been presented with a draft order and a draft minute. The minute will be amended somewhat to bring up to date the shareholder position, but I've read the draft minute, and I'm satisfied that is in an appropriate format.

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AI explanation based on the official legal text. Indicative, not a substitute for legal advice.