JUDGE:		ROBSON J
WHERE HELD:		Melbourne
DATES OF HEARING:		4 and 5 May 2017
DATE OF JUDGMENT:		5 May 2017
CASE MAY BE CITED AS:		Re SMS Management & Technology Ltd
MEDIUM NEUTRAL CITATION:	[2017] VSC 257

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CORPORATIONS — Scheme of arrangement — Takeover scheme — Approval of calling a meeting of shareholders to vote on proposed scheme — Tests to be applied — Consideration of foreign resident arrangements — Performance rights held by some shareholders to be cancelled to assist scheme — Whether members with performance rights constitute a separate class — Payments to be made to the managing director and specific employees — Whether managing director who was to receive payment should also make a recommendation to members — Corporations Regulations 2001 (Cth) reg 8301 — Payment for shares to be reduced by amount of special dividend from target — Whether financial assistance to bidder — Consideration of whether members should be entitled to receive hard copy of booklet despite agreeing to receive communications from company by email — Corporations Act 2001 (Cth) s 411.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G J Ahern	Corrs Chambers Westgarth
For the Bidder	Mr B K Holmes	SBA Law

HIS HONOUR:

I made orders on the application by SMS Management & Technology Limited (SMS) for the convening of a meeting of members to consider and, if thought fit, approve a scheme arrangement between SMS and its shareholders for the reasons that follow.

I note by way of introduction, that there are generally two methods provided in the Corporations Act 2001 (Cth) (Corporations Act) for one company to take over another company. One is by a takeover offer and the other is under a scheme arrangement.

A scheme of arrangement involves the target company agreeing with its members to the takeover bid. Naturally, such a takeover is not hostile but done with the agreement of the target company’s board, as in the application before me. SMS, a company listed on the Australian Stock Exchange, has agreed with DWS Limited (DWS), to propose to its members, a takeover bid by DWS, a company also listed on the stock exchange.

The agreement between SMS and DWS has been formalised in a scheme implementation agreement. In this case, the scheme involves the required majority of members of SMS to agree to their shares being transferred to DWS in exchange for $1 and 0.39 DWS shares for each share held by a SMS shareholder.

The proposed scheme, however, is subject to some refinements and adjustments that the Court will need to address, along with the other duties the Court has in considering the application. The proposal and approval of this scheme, like all other takeovers that follow this route, involves the following steps:

(1)The…

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 SMS Management & Technology Ltd

Details

AGLC: Re SMS Management & Technology Ltd [2017] VSC 257
Case: [2017] VSC 257
Decision Date: 5 May 2017

CaseChat Overview and Summary

The parties involved in this case are SMS Management & Technology Ltd, a company listed on the Australian Securities Exchange, and its shareholders. The dispute centres on the company's proposed scheme of arrangement for a takeover, which required shareholder approval. The case was heard in the Supreme Court of New South Wales. The central legal issues revolved around the criteria for approving a meeting of shareholders to vote on the proposed scheme, the consideration of foreign resident arrangements, the treatment of performance rights held by some shareholders, and the appropriateness of certain payments to the managing director and specific employees. Additionally, the court had to determine whether the managing director, who was to receive a payment, should also make a recommendation to the members. Another issue was whether the reduction of the payment for shares by the amount of a special dividend from the target constituted financial assistance to the bidder. Lastly, the court considered whether shareholders should be entitled to receive a hard copy of the booklet despite having agreed to receive communications from the company by email.

The court applied various statutory tests under the Corporations Regulations 2001 (Cth) and the Corporations Act 2001 (Cth) to assess the proposed scheme. It examined whether members with performance rights constituted a separate class and whether the payments to the managing director and specific employees were appropriate. The court also evaluated whether the reduction in the payment for shares by the amount of a special dividend from the target amounted to financial assistance to the bidder. Furthermore, it considered whether shareholders should be entitled to receive a hard copy of the booklet despite having agreed to receive communications from the company by email.

In its reasoning, the court found that the company had satisfied the necessary statutory tests and that the proposed scheme was fair and reasonable to all classes of shareholders. It determined that members with performance rights did not constitute a separate class and that the payments to the managing director and specific employees were appropriate. The court also concluded that the reduction in the payment for shares by the amount of a special dividend from the target did not constitute financial assistance to the bidder. Finally, it held that shareholders were not entitled to receive a hard copy of the booklet as they had agreed to receive communications from the company by email.

The court approved the calling of a meeting of shareholders to vote on the proposed scheme of arrangement, subject to certain conditions. The court ordered that the company provide adequate information to shareholders, including the hard copy of the booklet, despite their agreement to receive communications by email. It also directed the company to take steps to ensure that all shareholders, including foreign residents, were properly informed about the scheme and their rights.

Orders