In the matter of Shield Mercantile Pty Ltd

In the Federal Court of Australia, Shield Mercantile Pty Ltd, a company in voluntary administration, sought leave to transfer its shares under a deed of company arrangement. The application was made under section 444GA of the Corporations Act 2001. The company was plainly insolvent, with no residual equity value and no evidence suggesting it had substantial claims against its banks. The shareholders, who were related parties, sought to challenge the fairness of the deed of company arrangement, arguing they had been unfairly prejudiced.

The court had to decide whether the company was plainly insolvent, and if so, whether it was appropriate to stay the winding up of the company to allow the deed of company arrangement to proceed. The shareholders argued that the deed unfairly prejudiced them because the company had no residual equity value and no substantial claims against its banks. The court needed to determine if the deed was fair and equitable to the shareholders under section 459E(2) of the Corporations Act.

The court held that the company was plainly insolvent as it had no residual equity value and no evidence of substantial claims against its banks. The court noted that the shareholders, being related parties, had knowledge of the company's financial position and had been involved in the decision-making process leading to the voluntary administration. The court found that the deed of company arrangement was fair and equitable to the shareholders, as it provided a better outcome for them than a winding up. The court granted leave for the transfer of the company's shares under the deed of company arrangement and stayed the winding up of the company.