FEDERAL COURT OF AUSTRALIA
Mainstream Group Holdings Limited, in the matter of Mainstream Group Holdings Limited (First Scheme Hearing) [2021] FCA 948
File number:
NSD 271 of 2021
Judgment of:
PERRAM J
Date of judgment:
4 August 2021
Date of publication of reasons:
11 August 2021
Catchwords:
CORPORATIONS – members’ scheme of arrangement – first court hearing – application under Corporations Act 2001 (Cth) ss 411 and 1319 to convene members’ meeting – where director making recommendation has interest in employee share plan – where target company liable for break fee – where virtual members’ meeting proposed
Legislation:
Corporations Act 2001 (Cth) Pt 5.1, ss 411, 1319
Cases cited:
Dragontail Systems Limited, in the matter of Dragontail Systems Limited [2021] FCA 834
In the matter of Villa World Limited [2019] NSWSC 1207; 139 ACSR 550
In the matter of Vocus Group Limited [2021] NSWSC 630
QMS Media Limited, in the matter of QMS Media Limited [2019] FCA 2172
Division:
General Division
Registry:
New South Wales
National Practice Area:
Commercial and Corporations
Sub-area:
Corporations and Corporate Insolvency
Number of paragraphs:
13
Date of hearing:
4 August 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:
4 AUGUST 2021
THE COURT ORDERS THAT:
1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff convene and hold a meeting (Scheme Meeting) of the holders of ordinary shares in the Plaintiff (Scheme Shareholders):
(a) to consider, and, if thought fit, to approve (with or without modification) the scheme of arrangement (Scheme) proposed to be made between the Plaintiff and its shareholders, the terms of which are as set out in Appendix A to these orders;
(b) to be held as a wholly virtual meeting by means of audio-visual technology, with no physical assembly; and
(c) to be held on 6 October 2021 commencing at 10:30 am (AEST).
2. The scheme booklet, substantially in the form of Exhibit RS-2 to the affidavit of Ron Smooker sworn 3 August 2021 (Smooker Affidavit), and which comprises the explanatory statement as required by s 412(1)(a) of the Act, be and is hereby approved (subject to any amendments required by the Court).
3. The Scheme Meeting be convened by sending on or before 18 August 2021:
(a) in the case of Scheme Shareholders who have elected to receive shareholder communications electronically by way of email (Email Shareholders), an email substantially in the form contained at page 103 of Exhibit RS-1 to the Smooker Affidavit, which contains links to:
(i) a document substantially in the form of the scheme booklet (which contains, among other things, the Notice of Scheme Meeting as Attachment 4 to the scheme booklet); and
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- AGLC
- Re Mainstream Group Holdings Ltd [2021] FCA 948
- Case
- [2021] FCA 948
- Decision Date
CaseChat Overview and Summary
The court needed to determine whether it should approve the convening of the members’ meeting to consider the scheme. This involved examining whether the plaintiff had fulfilled the statutory requirements under the Corporations Act 2001 (Cth). Key issues included the director’s potential conflict of interest due to his involvement in an employee share plan, and the financial impact on the target company, which faced a substantial break fee liability. The court also had to consider whether holding the meeting virtually was appropriate and whether the explanatory statement provided to members was adequate.
The court found that the plaintiff had met the statutory requirements and granted the application. It held that the potential conflict of interest did not invalidate the meeting, as the director’s interest was disclosed, and the scheme was fair and reasonable to the members. The court also noted that the explanatory statement was comprehensive and informative. Regarding the virtual meeting, the court accepted that this method was suitable given the circumstances. Consequently, the court ordered the convening of the members’ meeting to be held virtually, with voting by poll, and specified the procedures for communication with shareholders and the conduct of the meeting.
The final orders included convening the members’ meeting on 6 October 2021, specifying the communication methods for different classes of shareholders, and detailing the procedures for proxy forms and voting. The court also set the date for the next hearing and directed the publication of an advertisement in The Australian.
Orders
Orders of the court
1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), the Plaintiff convene and hold a meeting (Scheme Meeting) of the holders of ordinary shares in the Plaintiff (Scheme Shareholders):
(a) to consider, and, if thought fit, to approve (with or without modification) the scheme of arrangement (Scheme) proposed to be made between the Plaintiff and its shareholders, the terms of which are as set out in Appendix A to these orders;
(b) to be held as a wholly virtual meeting by means of audio-visual technology, with no physical assembly; and
(c) to be held on 6 October 2021 commencing at 10:30 am (AEST).
2. The scheme booklet, substantially in the form of Exhibit RS-2 to the affidavit of Ron Smooker sworn 3 August 2021 (Smooker Affidavit), and which comprises the explanatory statement as required by s 412(1)(a) of the Act, be and is hereby approved (subject to any amendments required by the Court).
3. The Scheme Meeting be convened by sending on or before 18 August 2021:
(a) in the case of Scheme Shareholders who have elected to receive shareholder communications electronically by way of email (Email Shareholders), an email substantially in the form contained at page 103 of Exhibit RS-1 to the Smooker Affidavit, which contains links to:
(i) a document substantially in the form of the scheme booklet (which contains, among other things, the Notice of Scheme Meeting as Attachment 4 to the scheme booklet); and
(ii) a personalised proxy form for the Scheme Meeting substantially in the form of Attachment 5 to the scheme booklet (Proxy Form);
(b) in the case of Scheme Shareholders who have elected to receive shareholder communications by post (Postal Shareholders), the following documents to the registered address recorded in the Plaintiff’s register (by pre-paid post to those addresses if in Australia or by airmail or international courier service to those addresses if outside Australia):
(i) the scheme booklet (which contains, among other things, the Notice of Scheme Meeting as Attachment 4 to the scheme booklet);
(ii) a personalised Proxy Form; and
(iii) a reply-paid envelope for the return of the Proxy Form; and
(c) in the case of Scheme Shareholders who are not Email Shareholders or Postal Shareholders and whose registered address recorded in the Plaintiff’s register is in Australia, the following documents by pre-paid post addressed to those addresses:
(i) a document substantially in the form contained at page 105 of Exhibit RS-1 to the Smooker Affidavit containing a URL link to the scheme booklet (which contains, among other things, the Notice of Scheme Meeting as Attachment 4 to the scheme booklet);
(ii) a personalised Proxy Form; and
(iii) a reply-paid envelope for the return of the Proxy Form; and
(d) in the case of Scheme Shareholders, other than Email Shareholders or Postal Shareholders, whose registered address recorded in the Plaintiff’s register is outside Australia, the following documents by airmail or international courier service addressed to those addresses:
(i) a document substantially in the form contained at page 105 of Exhibit RS-1 to the Smooker Affidavit containing a URL link to the scheme booklet (which contains, among other things, the Notice of Scheme Meeting as Attachment 4 to the scheme booklet);
(ii) a personalised Proxy Form; and
(iii) a return envelope for the return of the Proxy Form.
4. Subject to these Orders, the Scheme Meeting be convened, held, and conducted in accordance with the provisions of Pt 2G.2 of the Act (save for any applicable replaceable rule) that apply to a meeting of the Plaintiff’s members.
5. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.
6. A Proxy Form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered electronically or by post in accordance with its terms by 10.30 am (AEST) on 4 October 2021
7. Mr Byram Johnston, or failing him, Ms JoAnna Fisher, be Chair of the Scheme Meeting.
8. The Chair of the Scheme Meeting shall have the power to adjourn the meeting to such time, date, and place as he or she considers appropriate.
9. Compliance with r 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) is dispensed with.
10. Compliance with r 3.4 and Form 6 of the Rules is dispensed with.
11. The Plaintiff publish in The Australian newspaper once on or before 16 September 2021 an advertisement substantially in the form of Appendix B to these orders.
12. The further hearing of the originating process is adjourned to a hearing before Perram J on 15 October 2021 at 10:15 am (AEST).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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