Re Asaleo Care Limited

Case [2021] FCA 406

FEDERAL COURT OF AUSTRALIA

Asaleo Care Limited, in the matter of Asaleo Care Limited [2021] FCA 406

File number: WAD 69 of 2021
Judgment of: BANKS-SMITH J
Date of judgment: 22 April 2021
Date of publication of reasons: 23 April 2021
Catchwords: CORPORATIONS - scheme of arrangement - application under s 411(1) of the Corporations Act 2001 (Cth) to convene a meeting to consider a proposed scheme of arrangement by transfer of shares - performance risk - break fee - exclusivity - special dividend - director recommendation - orders made
Legislation:

Corporations Act 2001 (Cth) ss 254T, 260A, 411, 412, 623, 1319, Part 5.1

Corporation Regulations 2001 (Cth) Schedule 8
Cases cited:

Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited [2015] FCA 341

Amcor Limited, in the matter of Amcor Limited [2019] FCA 346

APN News & Media Limited, in the matter of APN News & Media Limited [2007] FCA 770

Decimal Software Limited, in the matter of Decimal Software Limited [2018] FCA 1647

DWS Limited, in the matter of DWS Limited [2020] FCA 1590

EcoBiotics Limited, in the matter of EcoBiotics Limited [2017] FCA 643

Gazal Corporation Limited, in the matter of Gazal Corporation Limited [2019] FCA 701

Healthscope Limited, in the matter of Healthscope Limited [2019] FCA 542

Kidman Resources Limited, in the matter of Kidman Resources Limited [2019] FCA 1226

Milburn v Pivot Limited (1997) 78 FCR 472

Programmed Maintenance Services Limited, in the matter of Programmed Maintenance Services Limited [2017] FCA 1265

Re Arthur Yates & Co Ltd [2001] NSWSC 40

Re ERM Power Limited v Shell Energy Australia Pty Ltd [2019] NSWSC 1502

Re Navitas Ltd; Ex Parte Navitas Ltd [No 2] [2019] WASC 218

Re Skilled Group Ltd (No 1) [2015] VSC 789

Re SMS Management & Technology Ltd [2017] VSC 257

Re Villa World Ltd [2019] NSWSC 1207

Re Wesfarmers Ltd; Ex parte Wesfarmers Ltd [2018] WASC 308

Ruralco Holdings Limited, in the matter of Ruralco Holdings Limited [2019] FCA 878

Rusina Mining NL, in the matter of Rusina Mining [2010] FCA 517

RXP Services Limited, in the matter of RXP Services Limited [2021] FCA 38

Sienna Cancer Diagnostics Limited, in the matter of Sienna Cancer Diagnostics Limited [2020] FCA 899

Signature Gold Ltd, in the matter of Signature Gold Ltd [2017] FCA 1481

Tox Free Solutions Limited, In the matter of Tox Free Solutions Limited [2018] FCA 977

Wellcom Group Limited, in the matter of Wellcom Group Limited [2019] FCA 1655
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 82
Date of hearing: 22 April 2021
Counsel for the Plaintiff: Mr BK Holmes
Solicitor for the Plaintiff: King & Wood Mallesons
Counsel for the Interested Parties: Mr GJ Ahern
Solicitor for the Interested Parties: MinterEllison

ORDERS

WAD 69 of 2021

IN THE MATTER OF ASALEO CARE LIMITED (ACN 154 461 300)

ASALEO CARE LIMITED (ACN 154 461 300)

Plaintiff

ESSITY GROUP HOLDING BV AND
ESSITY HOLDING COMPANY AUSTRALIA PTY…

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AGLC
Re Asaleo Care Limited [2021] FCA 406
Case
[2021] FCA 406
Decision Date

CaseChat Overview and Summary

Asaleo Care Limited sought leave to convene a meeting of its members to consider a proposed scheme of arrangement under section 411(1) of the Corporations Act 2001 (Cth). The application was brought before the Court, which needed to determine whether the proposed scheme was appropriate for consideration by the company’s members and if it was a commercial proposition likely to gain the Court's approval if passed by the necessary majority. The key issues before the Court included the appropriateness of the scheme, the adequacy of the scheme booklet, and the compliance with statutory requirements for convening the meeting. The Court concluded that the scheme was appropriately structured and disclosed the necessary information, and that the scheme booklet was sufficient for the purposes of member information and decision-making. The Court found that the scheme was not inappropriate and was a commercial proposition that sensible business people might consider beneficial to its members. Therefore, the Court granted the application, allowing the convening of the meeting, the approval of the scheme booklet, and the electronic conduct of the meeting.

The Court’s decision was grounded on the principle that the standard of review for such applications is not to delve into the commercial merits of the scheme but to ensure that the scheme is not inappropriate and appears to be a viable commercial proposition. The Court reviewed the evidence provided, including the scheme booklet, directors' recommendations, and the Independent Expert’s Report, and was satisfied that all relevant matters had been addressed. The scheme, being a cash transfer arrangement, was deemed to be in a conventional form and likely to be approved if passed by the necessary majority. The Court found that the scheme booklet provided proper disclosure of the material considerations for shareholders, including the reasons for voting against the scheme. The Court also noted the support of interested parties, Essity BV and the Bidder, for the application. Based on these findings, the Court ordered the convening of the meeting, the approval of the scheme booklet, and specified the manner in which the meeting would be conducted, including the use of an online platform for electronic participation by the shareholders.

Orders

Orders of the court

1. Pursuant to r 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (Rules), Essity Group Holding BV and Essity Holding Company Australia Pty Ltd have leave to be heard in the proceeding without becoming a party to it.

2. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the plaintiff convene and hold a meeting (Scheme Meeting) of holders of fully paid ordinary shares in the capital of the plaintiff (Shareholders) for the purpose of considering, and, if thought fit, agreeing (with or without modification), to the proposed scheme of arrangement (Scheme) which is Annexure C to the draft scheme booklet at Annexure MG-6 to the affidavit of Mikkeli Godfree affirmed and filed on 21 April 2021 (Third Godfree Affidavit), together with its relevant annexures (Scheme Booklet).

3. Pursuant to s 411(1) and s 1319 of the Act, the Scheme Meeting is to be held on Tuesday 1 June 2021 at 3.00 pm (AEST, being Melbourne time), and is to be conducted electronically through an online platform (Online Platform) without members being physically present, the Online Platform to be accessed in accordance with the instructions included in the Notice of Scheme Meeting to be sent to shareholders in accordance with orders 4 and 12 below.

4. Subject to these orders, the Scheme Meeting is to be convened, held and conducted in accordance with:

(a) the provisions of Part 2G.2 of the Act 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; and

(b) the Notice of Scheme Meeting in the form or to the effect of the notice contained in Annexure E of the Scheme Booklet.

5. Pursuant to s 1319 of the Act, r 2.15 of the Rules shall not apply to the Scheme Meeting.

6. Mr Harry Boon or failing him Ms JoAnne Stephenson, be Chair of the Scheme Meeting.

7. The Chair of the Scheme Meeting shall have the power to adjourn the meeting to such time, date and place as s/he considers appropriate.

8. Five shareholders present via the Online Platform in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the Scheme Meeting.

9. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.

10. At the Scheme Meeting, each Shareholder present via the Online Platform in person or by proxy, corporate representative or attorney under power and entitled to vote will be entitled to one vote for each fully paid ordinary share in the capital of the plaintiff that the Shareholder is registered as holding at 3.00 pm (AEST, being Melbourne time) on 30 May 2021.

11. The Scheme Booklet, which contains an explanatory statement required by s 412(1)(a) of the Act, be and is hereby approved for distribution to shareholders subject to:

(a) correcting any minor typographical errors;

(b) any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Act; and

(c) adopting any amendments required or approved by the Court.

12. Subject to registration of the Scheme Booklet with the ASIC pursuant to s 412(6) of the Act, the plaintiff is to convene the Scheme Meeting by sending on or before 29 April 2021 to each Shareholder who appears on the plaintiff's register of members as at 23 April 2021:

(a) an email to each Shareholder who has nominated an electronic address for the purposes of receiving communications from the plaintiff (or, in the case of joint holders, to the holder whose name appears first in the plaintiff's register), such email to be substantially in the form of pages 512-13 of Annexure JKO-1 to the affidavit of James Ken Orr affirmed on 15 April 2021 (Orr Affidavit) which contains hyperlinks to:

(i) an electronic copy of a document substantially in the form of the Scheme Booklet appearing on the plaintiff's website; and

(ii) the website of Link Market Services and instructions on how to lodge a proxy form through that website for the Scheme Meeting;

(b) by post to Shareholders who have not nominated an electronic address for the purposes of receiving communications from the plaintiff:

(i) a copy of a document substantially in the form of the Scheme Booklet;

(ii) a proxy form (Proxy Form) and Q&A form for the Scheme Meeting, substantially in the form of pages 514-516 of Annexure JKO-1 to the Orr Affidavit;

(iii) a pre-addressed reply-paid envelope for the return of the Proxy Form (and Q&A form, if used).

13. Dispatch of the documents referred to in paragraph 12 of these orders in accordance with their terms is to be taken to be sufficient notice of the Scheme Meeting.

14. A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, a Proxy Form is completed and delivered in accordance with its terms or a proxy is lodged via the Link Market Services website in accordance with the instructions appearing on the website by 3.00 pm (AEST, being Melbourne time) on 30 May 2021.

15. Leave be given to the plaintiff to make application for orders under s 411(4) and s 411(6) of the Act following the Scheme Meeting for approval of the Scheme to be heard on 9 June 2021 at 9.30 am (AEST, being Melbourne time) or as soon thereafter as the business of the Court allows.

16. There be liberty to apply upon the giving of 48 hours' notice to ASIC.

17. An office copy of these orders shall be lodged with ASIC as soon as practicable after these orders are made.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I note for completeness that with leave of the Court, counsel appeared for Essity BV and the Bidder as interested parties and supported the application.Conclusion For the above reasons, I was satisfied that each of the matters relevant to an order convening a scheme meeting under s 411 was addressed by the evidence and that it was appropriate to make the orders sought by Asaleo, including those relating to the convening of the meeting, approving the scheme booklet for distribution and the conduct of the scheme meeting. The terms of the proposed scheme are in a conventional form. There is no reason why the scheme, if considered and adopted by the members, is not of such a nature as would be likely to be approved at the second court hearing. Orders were made accordingly.

Ratio Decidendi

Legal Principle Established

In summary, the standard of review is whether the proposed scheme is not inappropriate and is one that sensible business people might consider is of benefit to its members. It is not necessary for the Court to descend into the commercial merits of the proposed scheme. If the proposed arrangement is one that seems fit for consideration by a meeting of members and is a commercial proposition likely to gain the Court's approval if passed by the necessary majority, then leave should be given to convene the meeting.Consideration - standard matters The following are relevant in this proceeding to the six matters to be established at the first stage.Part 5.1 body A Part 5.1 body is defined by the Act to include, relevantly, a company. A review of the historical records of Asaleo, as evidenced by copies of the extracts from the ASIC registry, satisfy me that Asaleo is a company.Arrangement I am satisfied on the basis of the SIA and the scheme booklet contents that the scheme is an arrangement between Asaleo and its members. This is a cash transfer scheme, and such schemes have been approved on many occasions.Explanatory statement - the scheme booklet I have had the opportunity to consider the draft scheme booklet in the form in which it was provided to ASIC and its subsequent amended form. It is a detailed document which includes sections dealing with important dates and notices; a covering letter from the Chairman providing an overarching review of the scheme; information regarding the directors' recommendations; reasons to vote for or against the scheme; a question and answer section; details of the scheme; information on Asaleo; information on the Essity group; tax implications of the scheme; additional information that might be considered material to the scheme shareholders' decision as to how they should vote; and a glossary. It also has a number of annexures: the IER; the SIA; the scheme of arrangement document; the Deed Poll; and the notice of the scheme meeting. Given all the circumstances, I am satisfied to the necessary level that by the scheme booklet there will be proper disclosure as to the effect of the proposed scheme and the material considerations to which shareholders ought to have regard. Importantly, the scheme booklet gives disclosure as to the reasons why a shareholder may wish to vote against approval of the proposed scheme. Those are:(a)disagreement with the directors' recommendation and the IER;(b)a scheme shareholder will no longer hold shares in Asaleo and will not participate in any upside that may result from being an Asaleo shareholder;(c)the shareholder may believe it is in their best interests to maintain their current investment and risk profile;(d)the tax consequences of transferring the Asaleo shares may not be optimal for the shareholder's financial position; and(e)the shareholder may consider that there is potential for a superior proposal to be made after the date of the scheme booklet (although none had been received as at the date of the scheme booklet).