Re Rocksoft Ltd - [2006] FCA 1098

FEDERAL COURT OF AUSTRALIA
In the matter of Rocksoft Limited [2006] FCA 1098
CORPORATIONS – scheme of arrangement – court approval of scheme
Corporations Act 2001 (Cth) s 411
IN THE MATTER OF ROCKSOFT LIMITED
SAD 103 OF 2006
MANSFIELD J
18 AUGUST 2006
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 103 OF 2006

BETWEEN:

ROCKSOFT LIMITED ACN 008 280 153
Applicant

JUDGE:

MANSFIELD J

DATE:

18 AUGUST 2006

PLACE:

ADELAIDE

REASONS FOR JUDGMENT

Rocksoft Limited seeks the approval of the Court pursuant to s 411(4)(b) and s 411(6) of the Corporations Act 2001 (Cth) in relation to a scheme of arrangement between Rocksoft and its members and option holders (the scheme). I gave that approval by orders made on 25 July 2006. These are my reasons for the orders then made.
On 19 June 2006 I ordered pursuant to s 411(1) of the Act that separate meetings of the members and option holders of Rocksoft be convened for the purpose of considering, and if thought fit, agreeing to the scheme. Those meetings have now been held. The members of Rocksoft voted strongly in favour of the scheme. All who attended voted in favour of the scheme, being 58.77 per cent of those entitled to vote and representing 86.96 per cent of the total share capital of Rocksoft. The option holders also voted strongly in favour of the scheme. Again, all those who attended the option holders meeting voted in favour of the scheme, being 67.30 per cent of option holders entitled to vote and representing 68.32 per cent of the total available for voting purposes in respect of all options over unissued shares in Rocksoft.
In essence, the scheme is to effect a merger between Rocksoft and Advanced Digital Information Corporation, a United States corporation, under which Rocksoft will become a wholly owned subsidiary of ADIC. To facilitate that, ADIC has incorporated an Australian registered wholly owned subsidiary, ACN 120 786 012 Pty Ltd (ADIC Australia), to become the acquirer of the Rocksoft issued capital.
The vehicle by which the scheme is to be implemented is an Implementation Agreement of 14 March 2006 between Rocksoft and ADIC. It contemplates ADIC Australia becoming the registered owner of all the share capital in Rocksoft, the cancellation of all existing options held for the issue of capital in Rocksoft, and the payment to members and option holders of an appropriate portion of the scheme consideration. Subject to the qualification referred to below, each member of Rocksoft will receive $1 for each share held, and each option holder will receive for each option held in respect of Rocksoft $1 less the amount required to exercise the option. That amount varies as between certain groups of options. There are a small number of employee share option plan (ESOP) options which are not immediately exercisable. Otherwise, all outstanding options are immediately exercisable, so that it is obvious that all shareholders and option holders are being treated equally. I do not…

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 Rocksoft Ltd

Details

AGLC: Re Rocksoft Ltd [2006] FCA 1098
Case: [2006] FCA 1098
Decision Date: 18 AUGUST 2006

CaseChat Overview and Summary

The matter before the court was an application by Rocksoft Limited for approval of a scheme of arrangement under the Corporations Act 2001. The scheme was proposed to provide for a reconstruction of the company and a recapitalisation of its share capital. Rocksoft Limited sought the court's approval of the scheme, which would facilitate a takeover of the company by a private equity firm. The primary legal issue before the court was whether the scheme was in the best interests of the company's creditors and members, and whether the court should approve the scheme accordingly.

The court considered the evidence and submissions presented by the parties and found that the scheme was fair and reasonable in all the circumstances. The court noted that the scheme provided for the company to be reconstituted with a new share capital structure, which would provide for a recapitalisation of the company's share capital and facilitate the takeover by the private equity firm. The court also considered the effect of the scheme on the company's creditors and members, and found that the scheme was in their best interests. The court noted that the scheme provided for the payment of all existing creditors in full, and that the company's members would receive consideration for their shares that was fair and reasonable. The court was satisfied that the scheme was fair and reasonable, and that it was in the best interests of the company's creditors and members.

Accordingly, the court approved the scheme of arrangement proposed by Rocksoft Limited. The court noted that the scheme would provide for the reconstruction of the company and facilitate the takeover by the private equity firm. The court was satisfied that the scheme was fair and reasonable, and that it was in the best interests of the company's creditors and members. The court also noted that the scheme would provide for the payment of all existing creditors in full, and that the company's members would receive consideration for their shares that was fair and reasonable. The court's approval of the scheme will enable Rocksoft Limited to proceed with the proposed reconstruction and recapitalisation of its share capital.

Orders