Neo Resource Ltd, in the matter of Neo Resources Ltd
[2013] FCA 756
•16 July 2013
FEDERAL COURT OF AUSTRALIA
Neo Resources Ltd, in the matter of Neo Resources Ltd [2013] FCA 756
Citation: Neo Resource Ltd, in the matter of Neo Resources Ltd [2013] FCA 756 Parties: NEO RESOURCES LTD (ACN 007 708 429) File number: WAD 223 of 2013 Judge: BARKER J Date of judgment: 16 July 2013 Catchwords: CORPORATIONS – scheme of arrangement – application for order that company convene meeting Legislation: Corporations Act 2001 (Cth) s 411(1), s 411(2) Date of hearing: 16 July 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 23 Counsel for the Plaintiff Mr M Feutrill Solicitor for the Plaintiff Steinepreis Paganin
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 223 of 2013
IN THE MATTER OF NEO RESOURCES LTD (ACN 007 708 429)
NEO RESOURCES LTD (ACN 007 708 429)
Plaintiff
JUDGE:
BARKER J
DATE OF ORDER:
16 JULY 2013
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The plaintiff convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff (Neo Shareholders), to be held in Perth, Western Australia on or about 19 August 2013 or such other date as the Court may approve (Scheme Meeting) for the purpose of considering and, if thought fit, approving, with or without modifications, the Scheme which is Appendix 2 to the draft scheme booklet and explanatory statement, being Annexure “PPT-1” to the affidavit of Peter Patrick Torre sworn 2 July 2013 and filed herein (Scheme Booklet).
2.Subject to these orders, the Scheme Meeting is to be:
(a)convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act 2001 (Cth) that apply to members of a company and the provisions of the plaintiff’s constitution that are not inconsistent therewith and that apply to meetings of members;
(b)convened, held and conducted pursuant to section 1319 of the Corporations Act 2001 (Cth), on the basis that regulations 5.6.11 to 5.6.12 and 5.6.13A to 5.6.36A of the Corporations Regulations 2001 (Cth) do not apply to the meeting; and
(c)convened using the notice of meeting in the form or to the effect of the notice contained in Appendix 4 of the Scheme Booklet.
3.Mr Peter Patrick Torre or, failing him, Mr Jonathan Heath Stuart Murray is to be appointed to act as chairperson of the Scheme Meeting (Chairperson) and report the result of the Scheme Meeting to this Court.
4.The Chairperson can adjourn the Scheme Meeting in his discretion.
5.Two Shareholders present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the Scheme Meeting.
6.Voting on the resolution to approve the Scheme is to be conducted by way of poll.
7.The Scheme Booklet, which contains an explanatory statement required by section 412(1)(a) of the Corporations Act 2001 (Cth), subject to adopting the amendments set out in annexure “AMD-7” to the affidavit on Ms Annette Della-Vedova sworn 16 July 2013, be and is approved.
8.Subject to registration of the Scheme Booklet with the Australian Securities and Investments Commission (ASIC) pursuant to section 412(6) of the Corporations Act 2001 (Cth), the plaintiff is to dispatch the Scheme Booklet, substantially in the form approved under order 7 above, to the Shareholders who appear on the register of members no later than 16 July 2013 by ordinary pre-paid post (or by airmail to overseas Shareholders) on or before 19 July 2013 and dispatch on or before such date is to be taken to be sufficient notice of the meeting.
9.The matter is to be relisted on 29 August 2013 at 10.15am for such application as appropriate following the Scheme Meeting.
10.If the matter is relisted, the Plaintiff is to give notice of the hearing of the application pursuant to section 411(4)(b) of the Corporations Act 2001 (Cth) for orders approving the Scheme by publishing an advertisement in the public notices column of “The Australian” and “The West Australian” newspapers substantially in accordance with Form 6 of the Federal Court (Corporations) Rules 2000 (Cth), such advertisement to be published at least five days before any date allocated for the hearing and the Plaintiff otherwise be exempted from compliance with rule 3.4 of the Federal Court (Corporations) Rules 2000 (Cth).
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 223 of 2013
IN THE MATTER OF NEO RESOURCES LTD (ACN 007 708 429)
NEO RESOURCES LTD (ACN 007 708 429)
Plaintiff
JUDGE:
BARKER J
DATE:
16 JULY 2013
PLACE:
PERTH
REASONS FOR JUDGMENT
OVERVIEW
On 16 July 2013, the Court made an order under s 411(1) of the Corporations Act 2001 (Cth) (Act) convening a meeting of the holders of fully paid ordinary shares in the capital of the plaintiff (Neo) (shareholders) for the purpose of considering a proposed scheme of arrangement between Neo and the shareholders in relation to the acquisition of all of the ordinary shares in Neo by Perpetual Resources Limited (Perpetual), as well as ancillary orders.
These are short reasons for the making of the orders.
BACKGROUND
By affidavit, Peter Patrick Torre, company secretary and director of Neo, provides a background to the proposed scheme.
Neo is a mining exploration company, with its principal activity being its joint venture agreement with Oroya Mining Limited in relation to the Wiagdon Thurst Gold Project in New South Wales.
Neo was incorporated as a no liability public company in South Australia on 26 August 1970 under the name Lone Star Exploration NL. Neo has changed its name on a number of occasions and last changed its name on 4 May 2010. It changed to a limited liability public company on 4 May 2000. Neo was suspended from quotation on the Australian Securities Exchange (ASX) on 10 August 2007.
The board of directors of Neo comprises three directors: John Charles Geary (non-executive director), Colin Ross Hastings (non-executive director) and Mr Torre.
Neo has:
·an issued share capital of 56,452,589 shares;
·1,000,000 outstanding options with an exercise price of $0.20 and an expiry date of 1 July 2014 (options); and
·issued 630,000 convertible notes with a face value of $1.00, an interest rate of 10% per annum, a maturity date of 30 September 2013 and a conversion rate of $0.10 per share (convertible notes).
Perpetual was incorporated in Victoria on 29 November 2011 and has been listed on the ASX since 27 February 2013. Perpetual is a mining exploration company, with a stated dual strategy of developing an existing coal project in Indonesia and identifying further potential acquisitions of tenements for exploration.
PROPOSED SCHEME
The scheme of arrangement now proposed results from Neo entering into a merger implementation agreement with Perpetual on 26 April 2013 (as varied on 1 July 2013).
The scheme, if implemented, will result in all of the ordinary shares in Neo being transferred to Perpetual. In exchange, each Neo shareholder (other than certain overseas shareholders) will receive one ordinary share in Perpetual for every four Neo shares that they hold (scheme consideration).
Under the merger implementation agreement, shareholders with a registered address other than Australia or New Zealand (ineligible foreign holders) will not be eligible to receive the scheme consideration unless Neo and Perpetual determine that the laws of the relevant jurisdictions permit the issue of new Perpetual shares either unconditionally or after compliance with requirements that are not unduly onerous. Ineligible foreign shareholders, who number 45 and hold approximately 20.41% of the shares in Neo, will still be entitled to participate in the proposed scheme but will not receive the scheme consideration. Instead, the Perpetual shares that would have been issued to the ineligible foreign shareholders will be issued to a sale agent, who will be directed to sell the shares and distribute the net proceeds from the sale to the ineligible foreign shareholders.
The holders of the options are not included as part of the proposed scheme. Neo has entered into an agreement with the holders of the options under which the options will be cancelled for no consideration (options cancellation agreement).
The convertible notes were issued under a deed entered into between Neo and Regional Management Pty Ltd (Regional Management) dated 2 May 2012 (convertible notes agreement). Regional Management is a company controlled by Mark Victor Caruso. Under the terms of the convertible notes agreement (as amended), as at 30 April 2013 Neo was indebted to Regional Management in the sum of $673,975. This debt is secured by a general fixed and floating security over Neo’s assets.
On 1 July 2013, Neo, Perpetual and Regional Management entered into a deed of novation and variation in respect of the convertible notes agreement (this deed is subject to the scheme becoming effective) (deed of novation and variation). Under the terms of the deed, Perpetual agrees to assume Neo’s rights and obligations under the convertible notes agreement and the following material variations are made to the terms of the agreement:
·the principal sum outstanding is $630,000;
·Perpetual is to issue shares at a conversion rate of $0.20 (3,150,000 Perpetual shares); and
·the maturity date is extended to 31 December 2014.
Under the proposed scheme and pursuant to the merger implementation agreement, Mr Caruso and Mr Hastings will be appointed to the board of Perpetual as non-executive directors. Mr Caruso has an interest in 3,237,500 fully paid ordinary shares in Neo and 625,000 fully paid ordinary shares in Perpetual. As mentioned, Mr Caruso also has an interest in Regional Management, which will be issued additional shares in Perpetual. Mr Hastings has an interest in 1,000,000 fully paid ordinary shares in Neo. Mr Caruso and Mr Hastings will both be provided with remuneration for their work as non-executive directors of Perpetual.
Finally, pursuant to the merger implementation agreement, Neo and Perpetual agreed to enter into a facility agreement whereby Perpetual provided Neo with a cash advance of up to $350,000 (loan advance) secured by a charge over the assets of Neo. If the proposed scheme does not proceed, Neo must repay the balance of the loan advance within 60 business days.
CONSIDERATION
The Court is satisfied that the proposed scheme is one that may be approved under s 411 of the Act.
The level of disclosure to be provided by the draft scheme booklet is satisfactory.
An independent expert has provided a report, to be included with the draft scheme booklet to be given to shareholders, that states that the scheme is fair and reasonable and in the best interests of shareholders in the absence of a superior proposal. Furthermore, the independent expert has expressed an opinion to the effect that:
·the terms of the options cancellation agreement appear reasonable and at arm’s length (on the basis that it is unlikely that the holders of the options would elect to exercise the options prior to the expiry date); and
·the terms of the deed of novation and variation appear at arm’s length.
There is no demonstrated performance risk in relation to the proposed scheme that should prevent it from going forward to the meeting of shareholders. Further, it is not for the Court as this point to exercise commercial judgment in respect of the proposed scheme, but to leave the shareholders to exercise that judgment.
All necessary procedural matters required under the Act concerning the calling and conduct of the meeting of shareholders have been met. The meeting will be chaired by Mr Torre or, failing him, Jonathan Heath Stuart Murray, a partner of Neo’s solicitors. Mr Torre and Mr Murray have disclosed the extent of their commitments and obligations to Neo, none of which disqualifies either of them as an appropriate chairperson at the meeting.
Finally, pursuant to s 411(2) of the Act, the Australian Securities and Investments Commission (ASIC) has been given the required notice of the hearing of the application and a copy of the draft scheme booklet, and the Court is satisfied that ASIC has had a reasonable opportunity to:
·examine the terms of the proposed scheme and draft scheme booklet; and
·make submissions to the Court in relation to the proposed scheme and the draft scheme booklet.
CONCLUSION AND ORDERS
In all of these circumstances, appropriate disclosure of any relevant matters having been made on behalf of Neo, the Court is satisfied that the orders proposed should be made.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate:
Dated: 31 July 2013
0
0
1