Legal Research
Cases
Re Webcentral Group Ltd

Re Webcentral Group Ltd

Case [2020] NSWSC 1279 18 September 2020

Contract Formation

Schemes of Arrangement

Enterprise Value

Corporate Law & Governance

No judgment structure available for this case.

Type to search within this case.

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Webcentral Group Limited [2020] NSWSC 1279
Hearing dates: 21 August 2020
Date of orders: 21 August 2020
Decision date: 18 September 2020
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Orders made convening scheme meeting.

Catchwords:
CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, approve a proposed scheme of arrangement – Whether requirements to order scheme meeting are satisfied – Length of exclusivity period – Whether appropriate to consider break fee as percentage of enterprise value rather than equity value.

Legislation Cited:
- Corporations Act 2001 (Cth), ss 191, 195, 249S, 250B, 411, 1362A
- Corporations (Coronavirus Economic Response) Determination (No 1) 2020 (Cth), cl 5(1)

Cases Cited:
- Hostworks Group Limited ACN 008 010 820 (2008) 26 ACLC 137
- Re Adelaide Bank Ltd [2007] FCA 1582
- Re Andean Resources Ltd [2010] FCA 1190
- Re CSG Ltd [2019] NSWSC 1905
- Re Cytopia Ltd [2009] VSC 560
- Re DUET Finance Limited [2017] NSWSC 415
- ReEllerston Global Investments Ltd [2020] NSWSC 879
- Re ERM Power Ltd [2019] NSWSC 1502
- ReFolkestone Ltd [2018] FCA 1412
- Re Gazal Corporation Ltd [2019] FCA 701
- Re GBST Holdings Ltd [2019] NSWSC 1280
- Re Macquarie Private Capital A Ltd [2008] NSWSC 323
- Re Prime Media Group Ltd [2019] NSWSC 1805
- Re Pulse Health Ltd [2017] NSWSC 140
- Re Simavita Holdings Ltd [2013] FCA 1274
- Re Sirtex Medical Ltd [2018] FCA 1315
- Re Staging Connections Group Ltd [2015] FCA 1012
- Re Talent2 International Ltd [2012] FCA 771
- Re Tawana Resources NL [2018] FCA 1456
- Re TPG Telecom Limited [2020] NSWSC 772
- Re Villa World Limited [2019] NSWSC 1207
- Re Windlab Ltd [2020] NSWSC 571

Category: Principal judgment
Parties: Webcentral Group Limited (Plaintiff)
Representation:
Counsel:
I Jackman (Plaintiff)
D Sulan (Acquirer)
Solicitors:
Herbert Smith Freehills (Plaintiff)

File Number(s): 2020/206145

Judgment

Nature of the application and background

By Originating Process filed on 13 July 2020, the Plaintiff, Webcentral Group Limited (“Webcentral”) applies for an order under s 411 of the Corporations Act 2001 (Cth) that it convene a meeting of its members to consider a scheme of arrangement between it and its members.
By way of background, Webcentral is a company limited by shares, which operates a software and services business and is listed on the Australian Securities Exchange (“ASX”). Webcentral only has fully paid ordinary shares and does not have any outstanding performance rights or options on issue. Webcentral is relatively highly geared, and the total amount drawn under the existing debt facilities is approximately $47.6 million. The total amount drawn matures on 2 July 2021 (other than $2.5 million, which matures on 30 November 2020). Webcentral requires the support of its existing financiers to continue as…

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 Webcentral Group Ltd

Details

AGLC: Re Webcentral Group Ltd [2020] NSWSC 1279
Case: [2020] NSWSC 1279
Decision Date: 18 September 2020

CaseChat Overview and Summary

The matter in Re Webcentral Group Ltd involved an application by Webcentral Group Limited for orders convening a meeting of its members to consider and, if thought fit, approve a proposed scheme of arrangement. The court was tasked with determining whether the requirements under section 411 of the Corporations Act 2001 (Cth) for convening such a meeting were met. Specifically, the court had to consider the length of the exclusivity period granted to the company and the appropriate valuation method for calculating a potential break fee. The application was made in the Federal Court of Australia.

The primary legal issue before the court was whether the exclusivity period granted to Webcentral Group Limited was of a reasonable length to allow the company to negotiate and finalise the proposed scheme of arrangement. Additionally, the court had to decide whether it was appropriate to calculate the break fee as a percentage of the enterprise value rather than the equity value. The court considered the relevant statutory provisions, case law, and the principles of fairness and equity in corporate law.

In delivering its judgment, the court found that the exclusivity period granted to Webcentral Group Limited was not unreasonably long, given the circumstances of the case. The court held that the period was necessary to allow the company to engage in meaningful negotiations with potential purchasers. The court also concluded that it was appropriate to calculate the break fee as a percentage of the enterprise value, as this method provided a more comprehensive measure of the company's overall worth. The application for orders convening the meeting of members was subsequently approved by the court.

The court ordered that a meeting of Webcentral Group Limited's members be convened to consider and, if thought fit, approve the proposed scheme of arrangement. The court's decision ensured that the company could proceed with its negotiations and finalise the proposed scheme within the specified timeframe, while also providing clarity on the calculation of the break fee. This outcome balanced the interests of the company, its members, and potential purchasers in the corporate restructuring process.

Orders