Dragontail Systems Limited, in the matter of Dragontail Systems Limited (No 2)

In the case of Dragontail Systems Limited, in the matter of Dragontail Systems Limited (No 2), the court was tasked with deciding whether to approve a proposed scheme of arrangement, pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth). The scheme involved the acquisition of shares in the target company, Dragontail Systems Limited, in exchange for specified consideration. The application for approval was made by the plaintiff, Dragontail Systems Limited, and was uncontested. The legal issues before the court included the fairness of the scheme to the shareholders, the procedural integrity of the scheme meeting, and the statutory majorities required for approval.

The court found that the scheme was fair and reasonable, as concluded by the independent expert report. There was no evidence suggesting that the shareholders voted other than in good faith, that they cast their votes for an improper purpose, or that any member had been treated in a way that may be characterised as oppressive. The Australian Securities and Investments Commission (ASIC) had also provided a statement stating that it had no objections to the scheme. The voter turnout percentages at the scheme meeting, approximately 78.7% by shares participating and approximately 24.1% by members participating, were comparable to those in previous cases where schemes of arrangement had been approved.

The court approved the scheme and made orders regarding the communication with shareholders concerning their foreign withholding tax obligations. Specifically, the plaintiff was required to send emails, letters, or make phone calls to shareholders who had not returned tax declarations or had submitted incomplete declarations, in accordance with detailed annexures provided in the affidavits. These communications were to be repeated three months after the entry of the orders.

In summary, the court granted the application for approval of the scheme, ensuring compliance with statutory requirements and procedural fairness, and provided clear instructions for further communication with shareholders regarding their tax obligations.