Re Signature Gold Ltd

Case [2017] FCA 1481

FEDERAL COURT OF AUSTRALIA

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

File number: NSD 1846 of 2017
Judge: MARKOVIC J
Date of judgment: 1 November 2017
Date of publication of reasons: 8 December 2017
Catchwords: CORPORATIONS – schemes of arrangement – application for order that company convene meeting of members – application allowed
Legislation: Corporations Act 2001 s 411, 412, 1319
Cases cited:

Brambles Industries Ltd, in the matter of Brambles Industries Ltd and the Corporations Act 2001 (Cth) [2006] FCA 1273

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

FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69

In the matter of DUET Finance Limited [2017] NSWSC 415

Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177

Renard I A and Santamaria J G, Takeovers and Reconstructions in Australia (LexisNexis, subscription service)

Date of hearing: 1 November 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 56
Counsel for the Plaintiff: Mr R Austin
Solicitor for the Plaintiff: Maddocks Lawyers

ORDERS

NSD 1846 of 2017

IN THE MATTER OF SIGNATURE GOLD LTD ACN 142 902 985

SIGNATURE GOLD LTD ACN 142 902 985

Plaintiff

JUDGE:

MARKOVIC J

DATE OF ORDER:

1 NOVEMBER 2017

THE COURT ORDERS THAT:

1.Pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act):

(a)the plaintiff (Signature) convene a meeting (Scheme Meeting) of the holders of ordinary shares in Signature (Scheme Shareholders), for the purpose of considering and if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (Scheme) between Signature and the Scheme Shareholders, the terms of which scheme of arrangement are set out in Attachment 5 of the document at Tab 39 of Exhibit A (Scheme Booklet);

(b)the Scheme Meeting be held on 24 November 2017 at the offices of HLB Mann Judd at Level 19, 207 Kent Street, Sydney, New South Wales commencing at 11.00 am;

(c)the chairperson of the Scheme Meeting be Bruce William Fulton, or failing him, John Robert Hewson;

(d)the chairperson appointed to the Scheme Meeting has the power to adjourn or postpone the Scheme Meeting in his absolute discretion for such time and to such date as he considers appropriate;

(e)at the Scheme Meeting, the resolution to approve the Scheme be decided by way of a poll;

(f)the explanatory statement substantially in the form, or to the effect, of the Scheme Booklet be approved for distribution to the Scheme Shareholders, together with a proxy form for the Scheme Meeting (substantially in the form of the pro forma copy which is set out in Tab 43 of Exhibit A) (Proxy Form);

2.Pursuant to s 1319 of the Act, there be despatched to:

(a)each Scheme Shareholder who has nominated an electronic address for the…

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Re Signature Gold Ltd [2017] FCA 1481
Case
[2017] FCA 1481
Decision Date

CaseChat Overview and Summary

Signature Gold Ltd applied to the Federal Court for orders to convene a meeting of its members to consider a proposed scheme of arrangement under which StratMin Global Resources PLC would acquire all of the issued shares in Signature. The Court was required to consider whether it should grant the orders sought by Signature. The Court found that it should grant the orders sought. The Court was satisfied that the requirements of the Corporations Act 2001 (Cth) were met, and that the orders were in the best interests of the members of Signature. The Court made orders pursuant to ss 411(1) and 1319 of the Corporations Act, directing Signature to convene a meeting of its members to consider the proposed scheme of arrangement. The Court also made orders pursuant to r 2.15 of the Federal Court (Corporations) Rules 2000, exempting the meeting from certain provisions of the Corporations Regulations 2001 (Cth). The Court further made orders for the electronic despatch of the notice of scheme meeting and the scheme booklet to those Signature shareholders who have nominated an electronic address for the purpose of receiving notices of meeting and proxy forms, and an order dispensing with the requirements of r 3.4 of the Federal Court (Corporations) Rules 2000. The Court stood over the proceeding to 12 December 2017 for the hearing of any application to approve the Scheme. The Court granted liberty to apply.

Orders

Orders of the court

1. Pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act):

(a) the plaintiff (Signature) convene a meeting (Scheme Meeting) of the holders of ordinary shares in Signature (Scheme Shareholders), for the purpose of considering and if thought fit, agreeing (with or without modification) to the proposed scheme of arrangement (Scheme) between Signature and the Scheme Shareholders, the terms of which scheme of arrangement are set out in Attachment 5 of the document at Tab 39 of Exhibit A (Scheme Booklet);

(b) the Scheme Meeting be held on 24 November 2017 at the offices of HLB Mann Judd at Level 19, 207 Kent Street, Sydney, New South Wales commencing at 11.00 am;

(c) the chairperson of the Scheme Meeting be Bruce William Fulton, or failing him, John Robert Hewson;

(d) the chairperson appointed to the Scheme Meeting has the power to adjourn or postpone the Scheme Meeting in his absolute discretion for such time and to such date as he considers appropriate;

(e) at the Scheme Meeting, the resolution to approve the Scheme be decided by way of a poll;

(f) the explanatory statement substantially in the form, or to the effect, of the Scheme Booklet be approved for distribution to the Scheme Shareholders, together with a proxy form for the Scheme Meeting (substantially in the form of the pro forma copy which is set out in Tab 43 of Exhibit A) (Proxy Form);

2. Pursuant to s 1319 of the Act, there be despatched to:

(a) each Scheme Shareholder who has nominated an electronic address for the purpose of receiving notices of meeting and proxy forms from Signature, at such address, an email substantially in the form of the document which is at Tab 47 of Exhibit A, including links to the Scheme Booklet and Proxy Form; and

(b) each other Scheme Shareholder:

(i) by hand at, or by ordinary pre-paid post or courier to the address of the Scheme Shareholder set out in the register of members of Signature; or

(ii) in the case of a Scheme Shareholder whose registered address is outside Australia, by airmail or facsimile to the address of that Scheme Shareholder as set out in the register of members of Signature,

a copy of the Scheme Booklet and Proxy Form and a reply envelope addressed to Signature.

3. If an email notification of a failure to deliver an email to a Scheme Shareholder’s nominated electronic address pursuant to Order 2(a) of these orders is received, there be despatched by hand at, or by ordinary pre-paid post or courier to, the address of each such Scheme Shareholder as set out in the register of members of Signature, a copy of the Scheme Booklet, Proxy Form and a reply envelope addressed to Signature.

4. Pursuant to r 2.15 of the Federal Court (Corporations) Rules 2000, the provisions of regulations 5.6.11 to 5.6.36A of the Corporations Regulations 2001 (Cth), other than regulation 5.6.13, shall not apply to the Scheme Meeting.

5. Notice of the hearing of the application for orders approving the Proposed Scheme be published once in “The Australian” newspaper, by advertisement substantially in the form of Annexure “A” to these Orders, such advertisement to be published on or before 8 November 2017, and the Plaintiff otherwise be exempted from compliance with r 3.4 of the Federal Court (Corporations) Rules 2000.

6. The proceeding be stood over to 12 December 2017 at 10.15 am before Justice Markovic for the hearing of any application to approve the Scheme.

7. There be liberty to apply.

8. These orders be entered forthwith.

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

Background

Background to the litigation

On 1 November 2017 I made orders, including orders pursuant to s 411(1) of the Corporations Act 2001 (Cth) (Act), after a first court hearing in relation to a scheme of arrangement. These are my reasons for making those orders.BACKGROUNDSignature Gold Ltd Signature Gold Ltd (Signature) is an Australian public company limited by shares. Its issued share capital comprises 88,185,409 fully paid ordinary shares issued for a total consideration of $5,122,049.05. There are currently 205 registered shareholders in Signature and no options over unissued shares. Signature has not been admitted to the official list of any stock exchange and its shares are not quoted for trading in any stock market. The primary objective of Signature has been exploration for precious metals, particularly gold, and subsequent development of economic deposits in Australia. Signature is currently conducting gold exploration and development projects at nine project sites.StratMin Global Resources PLC StratMin Global Resources PLC (StratMin) was incorporated in England and Wales on 7 July 2004. In about December 2004 it was admitted to the Alternative Investment Market (AIM) operated by the London Stock Exchange (LSE). According to Kieren Mildwaters, a solicitor and partner at Mildwaters Consulting LLP, the AIM is a market aimed at small and mid-capital growth companies, usually used as an exchange for companies seeking access to capital to realise their growth and innovation potential. Companies whose securities are admitted to trading on the AIM are subject to and must comply with the AIM Rules for Companies published by the LSE (AIM Rules). In or about September 2016, following the completion of a fundamental divestment, StratMin became a cash shell company pursuant to rule 15 of the AIM Rules. Under the AIM Rules, StratMin was required to make an acquisition that would constitute a “reverse takeover” within six months of becoming a cash shell company or its shares would be suspended from trading on the AIM. Because no such transaction took place within that time period, trading of StratMin’s shares was suspended. On 3 August 2017, pursuant to rule 41 of the AIM Rules, StratMin’s shares were cancelled from trading on the AIM because the announcement and publication of an admission document had not been made within six months of its suspension from trading on the AIM.Previous scheme From approximately December 2016 Signature entered into discussions with StratMin following which, on 2 February 2017, it announced a proposal for StratMin to acquire all of the issued shares in Signature by way of a scheme of arrangement under Pt 5.1 of the Act (Previous Scheme). On 16 March 2017 Signature entered into a scheme implementation agreement with StratMin under which, subject to the satisfaction or waiver of a number of conditions, Signature agreed to propose the Previous Scheme to Signature shareholders. Signature made an application to this Court for approval of the Previous Scheme and, on 21 June 2017, orders were made to convene a meeting of the Signature shareholders: see Signature Gold Ltd, in the matter of Signature Gold Ltd [2017] FCA 766. That application was discontinued with the leave of the Court after third-party funding anticipated by StratMin did not eventuate.PROPOSED SCHEME

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Signature also sought orders in relation to the electronic despatch of the notice of scheme meeting and the scheme booklet to those Signature shareholders who have nominated an electronic address for the purpose of receiving notices of meeting and proxy forms; a direction under s 1319 of the Act that, other than reg 5.6.13 of the Corporations Regulations, the provisions of the Corporations Regulations referred to in r 2.15 of the Corporations Rules would not apply to the scheme meeting; and an order dispensing with the requirements of r 3.4 of the Corporations Rules. I was satisfied that those orders should be made.CONCLUSION For the reasons set out above I made the orders sought by Signature.

Ratio Decidendi

Legal Principle Established

If the proposed scheme becomes effective then on the Implementation Date, as that term is defined in the scheme:(1)the Scheme Shares must be transferred to StratMin;(2)in consideration for the transfer of the Scheme Shares, StratMin must issue or procure the issue of StratMin shares (Consideration Shares) to each Signature shareholder (Scheme Participants); and(3)the Consideration Shares, being 450 million StratMin shares with a total value of GBP9 million issued at a price of two pence per share, will be allocated to Scheme Participants on a pro-rata basis. Clause 5.4 of the scheme booklet provides that, in addition to the Consideration Shares to be issued to Scheme Participants, StratMin will offer up to 100 million StratMin shares for subscription at a subscription price equal to the price of the Consideration Shares to raise up to GBP2 million. StratMin intends to promote the offer in November 2017 and to give effect to it in December 2017. Following the proposed scheme StratMin will apply for its enlarged share capital, including the Consideration Shares, to be admitted to trading on the AIM in accordance with the AIM Rules. Admission will allow the shareholders of StratMin to trade the enlarged share capital on the AIM. DEBT TO EQUITY CONVERSION Immediately prior to the scheme meeting Signature will hold a shareholders meeting seeking approval for the conversion from debt to equity of certain amounts which are currently owed by Signature to four individuals on account of unpaid director and consulting fees and director’s loans. Signature will propose to repay those debts by issuing Signature shares to each of those individuals’ nominees so as to strengthen its balance sheet and to facilitate the potential raising of further funds. The meeting of Signature shareholders will be convened and conducted in accordance with Pt 2E.1 of the Act. This debt to equity conversion is drawn to shareholders’ attention in cl 8.12 of the scheme booklet. THE SCHEME IS RECOMMENDED BY SIGNATURE DIRECTORS (EXCLUDING MR BOYNTON) The directors of Signature, excluding Robert Boynton, unanimously recommend that the shareholders of Signature vote in favour of the scheme in the absence of a superior proposal. Mr Boynton is both a shareholder and director of Signature and of StratMin. In light of that, Mr Boynton has not:(1)participated in, or voted on, any decision of the Signature directors that was identified as having any relationship to the proposed scheme;(2)attended any meeting of the Signature board that related to matters concerning the proposed scheme;(3)been provided with any minutes relating to meetings referred to in the preceding subparagraph; or(4)participated on behalf of Signature in any discussions with respect to the proposed scheme or any negotiations regarding any rival third-party proposals.RELEVANT LEGAL PRINCIPLES Section 411(1) of the Act relevantly provides that, where an arrangement is proposed between a Pt 5.1 body and its members, the Court may, on the application of the body in a summary way, order a meeting of the members to be convened in such manner and to be held in such place as the Court directs. Where the Court makes such an order, the Court may approve the explanatory statement required by s 412(1)(a) to accompany the notice of such a meeting.