Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (Scheme Approval)
[2021] FCA 1271
•15 October 2021
FEDERAL COURT OF AUSTRALIA
Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (Scheme Approval) [2021] FCA 1271
File number:
NSD 271 of 2021
Judgment of:
PERRAM J
Date of judgment:
15 October 2021
Date of publication of reasons:
19 October 2021
Catchwords:
CORPORATIONS – members’ scheme of arrangement – second court hearing – application under Corporations Act 2001 (Cth) s 411 for orders approving scheme
Legislation:
Corporations Act 2001 (Cth) s 411
Cases cited:
Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (First Scheme Hearing) [2021] FCA 948
Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (Scheme Meeting Orders) [2021] FCA 1163
Division:
General Division
Registry:
New South Wales
National Practice Area:
Commercial and Corporations
Sub-area:
Corporations and Corporate Insolvency
Number of paragraphs:
6
Date of hearing:
15 October 2021
Counsel for the Plaintiff:
Dr R P Austin with Mr B J May
Solicitor for the Plaintiff:
Maddocks Lawyers
Counsel for Interested Parties:
Mr J Williams SC
ORDERS
NSD 271 of 2021
IN THE MATTER OF MAINSTREAM GROUP HOLDINGS LIMITED
MAINSTREAM GROUP HOLDINGS LIMITED
Plaintiff
order made by:
PERRAM J
DATE OF ORDER:
15 OCtober 2021
THE COURT ORDERS THAT:
1. Pursuant to sections 411(4)(b) and 411(6) of the Corporations Act 2001 (Cth) (Act), the Scheme of Arrangement between the Plaintiff and its shareholders, the terms of which are set out in the document that is Annexure A to these Orders, be approved.
2. The Plaintiff lodge with the Australian Securities and Investments Commission a copy of the approved Scheme of Arrangement referred to in Order 1 above at the time of lodging an office copy of these Orders under section 411(10) of the Act.
3. Pursuant to section 411(12) of the Act, the Plaintiff be exempted from compliance with section 411(11) of the Act in relation to Order 1 above.
4. Pursuant to rule 39.34 of the Federal Court Rules 2011 (Cth), these orders be entered forthwith.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
On 15 October 2021 I made orders approving this scheme of arrangement. The background to the scheme is explained in the reasons I gave for making orders convening a meeting of the shareholders of Mainstream Group Holdings Limited (‘Mainstream’) to consider the scheme proposal: Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (First Scheme Hearing) [2021] FCA 948. In effect, the scheme involves a takeover by Apex Fund Holdings Australia Pty Limited of Mainstream with each share in Mainstream being acquired for $2.80 in cash.
The orders convening the scheme meeting were made on 4 August 2021. By interlocutory application dated 23 September 2021, Mainstream sought some variations to those orders. I acceded to that interlocutory application and made orders and published reasons on 24 September 2021: Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (Scheme Meeting Orders) [2021] FCA 1163.
The scheme meeting was held in a virtual manner at 10.30 am on 6 October 2021. The entitlement to vote was determined as at 7 pm on 4 October 2021. At that time there were 1,282 shareholders holding 139,658,362 shares. At the meeting 170 shareholders voted (in person or by proxy and including those who lodged direct votes) in favour of the resolution and 2 against. The shareholders who voted in favour held 112,586,543 shares whilst those against held 22,500 shares. So far as the meeting is concerned the scheme was therefore overwhelmingly approved both by the number of persons who voted (98.84%) and by the number of shares those persons held (99.98%). It is true that only 172 of the 1,282 shareholders cast votes at the scheme meeting (i.e. 13.53%) but this compares very favourably with the number of shareholders who have historically attended Mainstream’s annual general meeting. Further, the shareholders who did vote held 80.63% of Mainstream’s share capital. Accordingly, I am not troubled by the voter turnout.
There was a minor procedural irregularity which occurred in relation to certain votes cast on behalf of Mr Johnston who was chair of the scheme meeting. Mr Johnston gave affidavit evidence that he caused instructions to be given to the company hosting the virtual scheme meeting to record votes in favour cast in respect of 7,617 shares that Mr Johnston controlled. The reason Mr Johnston did this was because he considered that it would have been practically difficult for him to attend to the casting of these votes himself while simultaneously chairing the scheme meeting. The procedural irregularity arose because the person entrusted to give effect to these instructions recorded the votes as being cast shortly before the meeting had technically been opened and therefore before the proper time for the casting of votes. Given the very small number of shares involved, this development could have had no conceivable impact on the outcome of the scheme meeting. I am not troubled by it.
The reason I convened the scheme meeting, shortly stated, was because it appeared fair and reasonable and bona fide. My views on that issue have not changed. I am satisfied that the power of the Court under s 411 of the Corporations Act 2001 (Cth) to approve the scheme has been enlivened and that an appropriate exercise of the Court’s discretion is to approve the scheme. It appears that the shareholders have arrived at the same conclusion.
It was for these reasons that I approved the scheme of arrangement on 15 October 2021.
I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.
Associate:
Dated: 19 October 2021
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