Bute Energy Development Holdings Ltd resolutions 20/01/25 and court order

On January 20th 2025 Bute Energy Development Holdings (BEDH) passed 2 resolutions. The first resolved that a single deferred share of £110 million be issued by capitalising a revaluation reserve of the same amount; the second, following the passing of the first, resolved that the deferred share be cancelled and the amount arising be attributed to distributable reserves. The reduction of capital resulting from the second resolution was approved by a court order on January 28th.

What does this all mean and why a court order? The effect of the 2 resolutions taken together is to change a non distributable reserve into a distributable reserve thereby circumventing Company Law which, for obvious reasons, treats revaluations as non distributable. Apart from window dressing the most likely purpose of this device is to enable distributions to shareholders notwithstanding brought forward losses on the profit and loss account and this would seem to be Bute’s objective.

The background to this is that In April 2023 the funding arrangements between Bute and Copenhagen Infrastructure were revised and as part of this in July 2023 CI acquired a call option from Bute Energy Development Holdings (BEDH) giving it the option to purchase the 99.9% of the shares of the energy park companies not presently held by it at an an agreed bur undisclosed strike price on the commencement of construction.  BEDH received £60 million for the sale of the option albeit this would effectively be repaid by the adjustment of the strike price if it were taken up. Notwithstanding this it seems the directors were keen to transfer these funds to their private companies despite the indebtedness and carried forward losses in BEDH. To overcome this problem the company revalued its investment in its subsidiaries creating a revaluation reserve of £190 million which was capitalised by the issue of one deferred share in that amount. 3 days later the deferred share was cancelled and the proceeds attributed to distributable reserves thus enabling the payment of the dividend of £60 million to its parent Bute Energy (BE). BE in turn paid a dividend of the same amount to its parent Windward Energy (WE) and finally WE in turn paid a dividend of £58 million to its shareholders private companies - Windward Global for Oliver Millican (82%), Windward SG for Stuart George (8%) , Windward LS for Lawson Steele (8%) and Windward JR for John Reilly (1%).

Unfortunately as Bute have conceded “it became apparent that the deferred share issue was ineffective”.  No details are given on this but it seems likely that there were concerns that the directors declaration of solvency required on the cancellation of shares was simply not accurate given the company’s circumstances. As a result of this the dividend was subsequently reversed and a receivable of £60 million from BE was recorded in the accounts of BEDH at 31/3/24. Curiously no similar receivable from WE is recorded in the accounts of BE. It seems likely that the funds remained in the promoter’s companies.

The resolutions in January 2025 appear to be an effort to rectify this shambles by again issuing and cancelling a deferred share albeit this time substituting a court order for the declaration of solvency on the cancellation.. A court order is normally only required for a public company on the cancellation of shares - its purpose being to protect creditors. In this case it could hardly be refused as clearly there was no risk to creditors as the share was only issued moments before it was cancelled!

It seems likely that the dividend will now be reinstated and the promoters will keep the money. Notwithstanding this It still leaves open the question of whether a company such as Bute which is close to the Government should be scurrying around using artificial devices such as phoney share issues to circumvent Company Law on distributions to its promoters. Not illegal perhaps but not a good look!