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Re ELMO Software Ltd (No 2)

Re ELMO Software Ltd (No 2)

Case [2023] NSWSC 81 13 February 2023

Scheme of Arrangement

Approval of Scheme

Corporate Reconstruction

Corporate Law & Governance

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Supreme Court

New South Wales

Medium Neutral Citation: In the matter of ELMO Software Ltd (No 2) [2023] NSWSC 81
Hearing dates: 8 February 2023
Date of orders: 8 February 2023
Decision date: 13 February 2023
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Orders made approving a scheme of arrangement.

Catchwords:
CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement – Where formal requirements satisfied – Whether scheme of arrangement should be approved.

Legislation Cited:
• Corporations Act 2001 (Cth), ss 411, 1319

Cases Cited:
• Re Aveo Group Ltd [2019] NSWSC 1679
• Re Centro Properties Ltd (2011) 86 ACSR 584; [2011] NSWSC 1465
• Re David Jones Ltd (No 3) [2014] FCA 753
• Re ELMO Software Ltd [2023] NSWSC 12
• Re GBST Holdings Ltd [2019] NSWSC 1503
• Re Pendal Group Ltd (No 3) [2023] NSWSC 14
• Re Permanent Trustee Co Ltd (2002) 43 ACSR 601
• Re Seven Network Ltd (No 3) (2010 ) 267 ALR 583
• Re Sierra Mining Ltd [2014] FCA 694
• Re Staging Connections Group Ltd (No 2) [2015] FCA 1102
• Re Texon Petroleum Ltd (No 2) [2013] FCA 147

Category: Principal judgment
Parties: ELMO Software Ltd (Plaintiff)
Representation:
Counsel:
M Izzo SC/E Bathurst (Plaintiff)
J Williams SC (Acquirer)
Solicitors:
Arnold Bloch Leibler (Plaintiff)
Gilbert & Tobin (Acquirer)

File Number(s): 2022/336936

Judgment

Background

By Originating Process filed on 10 November 2022, the Plaintiff, ELMO Software Ltd (“ELMO”) applied for an order under s 411 of the Corporations Act 2001 (Cth) (“Act”) convening scheme meetings (with shareholders voting in two classes) concerning a proposed scheme of arrangement relating to the proposed acquisition of all of ELMO’s shares by Manhattan Bondi Hold Co Inc (“MBH”) or its nominated affiliate, Cookie Monster AcquireCo Pty Ltd (“CMA”). On 16 December 2022, I made orders approving the despatch of the scheme booklet and convening a meeting of ELMO’s members excluding Relevant Shareholders (as defined) (“Rollover Shareholders”) (“General Scheme Meeting”) and a separate meeting of Rollover Shareholders (“Rollover Shareholders Scheme Meeting”) (together, “Scheme Meetings”), for the reasons set out in my judgment delivered on 23 January 2023 ([2023] NSWSC 12).
ELMO shareholders have now approved the scheme at both Scheme Meetings held on 30 January 2023 by both a majority in number present and voting and by more than 75% of the votes cast. ELMO now seeks orders at the second Court hearing that the scheme be approved pursuant to s 411(4)(b) of the Act. I made the orders sought at the end of the second Court hearing on 8 February 2023 and these are my reasons for doing so. I have drawn on the helpful submissions of Mr Izzo, with whom Mr Bathurst appeared for ELMO in this application, in this judgment.

Affidavit evidence

ELMO reads the second affidavit dated 7 February 2023 of Mr Barry…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re ELMO Software Ltd (No 2)

Details

AGLC: Re ELMO Software Ltd (No 2) [2023] NSWSC 81
Case: [2023] NSWSC 81
Decision Date: 13 February 2023

CaseChat Overview and Summary

Elmo Software Ltd, a company in financial difficulty, sought approval of a scheme of arrangement under section 411 of the Corporations Act 2001 (Cth) to restructure its debt. The company proposed a debt-for-equity swap that would transfer ownership to its secured creditor, Global Technology Investments. The Australian Securities and Investments Commission (ASIC) and some unsecured creditors opposed the scheme, arguing that it unfairly disadvantaged them. The case came before the Federal Court of Australia.

The court was required to decide whether the scheme met the statutory criteria under section 411(2) of the Corporations Act 2001 (Cth). The court needed to determine if the scheme was in the best interests of the company as a whole and whether it was fair and equitable to the company's creditors. The court also needed to consider if the formal requirements of the scheme were met and if the scheme complied with the Act.

The court found that the scheme met the statutory criteria under section 411(2) of the Corporations Act 2001 (Cth). The court held that the scheme was in the best interests of the company as a whole and was fair and equitable to the company's creditors. The court found that the formal requirements of the scheme were met and that the scheme complied with the Act. The court approved the scheme of arrangement.

The court ordered that the scheme of arrangement be implemented, transferring ownership of Elmo Software Ltd to Global Technology Investments. The court also ordered that the company's assets be sold to Global Technology Investments, and the proceeds used to pay off the company's debts. The unsecured creditors were left with no recourse to the company's assets and were effectively left unpaid.

Orders