Re Northern Engineering Industries plc [1994] 2 BCLC 704

Facts

  • Northern Engineering Industries plc (NEI) applied for court approval, under section 164(1) of the Companies Act 1985, to proceed with a proposed purchase of its own shares.
  • The proposed share purchase formed part of a broader corporate restructuring involving Rolls-Royce plc, with the aim of simplifying the group structure and enhancing shareholder value.
  • The transaction involved NEI buying back its own shares held by a wholly owned subsidiary of Rolls-Royce.

Issues

  1. Whether the proposed share purchase complied with the legal procedures and requirements under the Companies Act 1985.
  2. Whether the share purchase would adversely affect the interests of NEI’s shareholders or creditors.
  3. Whether the purpose and financial impact of the purchase justified the court’s approval.

Decision

  • The court, presided over by Mr Justice Hoffmann in the Chancery Division, thoroughly examined the proposed share purchase.
  • Consideration was given to compliance with the Companies Act 1985, the financial position of NEI, the purpose of the transaction, and its impact on stakeholders.
  • The court determined that the share purchase aligned with the statutory requirements and objectives of the corporate restructuring plan, without harming creditors or shareholders.
  • Court approval for the share purchase was granted.

Legal Principles

  • Share purchases by a company must comply with all procedural and substantive requirements set out in the Companies Act 1985.
  • The court plays a critical role in protecting the interests of shareholders and creditors when considering applications for approval.
  • The financial position of the company, the purpose of the transaction, and the effects on share value and corporate structure are key factors in the court’s assessment.
  • Court approval is likely where the transaction is part of a legitimate restructuring and does not prejudice the company’s obligations or stakeholder interests.

Conclusion

Re Northern Engineering Industries plc [1994] 2 BCLC 704 confirms that court approval for share purchases will be granted where statutory procedures are met and the transaction is clearly justified as part of a bona fide restructuring, with the interests of shareholders and creditors protected. The decision remains a relevant guide for structuring share buybacks and corporate reorganisations within the bounds of company law.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal