FEDERAL COURT OF AUSTRALIA
Xplore Wealth Limited, in the matter of Xplore Wealth Limited [2020] FCA 1868
File number: NSD 1279 of 2020 Judgment of: MARKOVIC J Date of judgment: 18 December 2020 Date of publication of reasons: 23 December 2020 Catchwords: CORPORATIONS – scheme of arrangement – first court hearing – application for orders pursuant to s 411 and s 1319 of the Corporations Act 2001 (Cth) that company convene meeting of members and despatch explanatory statement – where proposed share scheme is fair and reasonable and in the best interests of shareholders – where proposed option scheme is not fair but is reasonable and in the best interests of optionholders – application allowed Legislation: Corporations Act 2001 (Cth), ss 411, 1319
Federal Court (Corporations) Rules 2000 (Cth)
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F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
First Pacific Advisors LLC v Boart Longyear Ltd [2017] NSWCA 116; (2017) 121 ACSR 136
MIA Group Ltd [2004] NSWSC 712; (2004) 50 ASCR 29
Re CSR Ltd (2010) 183 FCR 358
Re Nine Entertainment Group Ltd (No 1) (2012) 211 FCR 439
Sovereign Life Assurance Company v Dodd [1892] 2 QB 573
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Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 44 Date of hearing: 18 December 2020 Counsel for the Plaintiff: Mr D Barnett and Mr R Jameson Solicitor for the Plaintiff: Hamilton Locke Counsel for HUB24 Limited: Mr M Oakes SC Solicitor for HUB24 Limited: MinterEllison ORDERS
NSD 1279 of 2020 IN THE MATTER OF XPLORE WEALTH LIMITED ACN 128 316 441
XPLORE WEALTH LIMITED ACN 128 316 441
Plaintiff
order made by:
MARKOVIC J
DATE OF ORDER:
18 December 2020
THE COURT ORDERS THAT:
1.Pursuant to s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act), the plaintiff convene and hold:
(a)a meeting of its shareholders (Share Scheme Meeting) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement (Share Scheme) proposed between the plaintiff and its shareholders (Scheme Shareholders), being the scheme substantially in the form contained at Annexure A to these Orders; and
(b)a meeting of its optionholders (Option Scheme Meeting) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement (Option Scheme) proposed between the plaintiff and its optionholders (Scheme Optionholders), being the scheme substantially in the form contained at Annexure B to these Orders,
(together, the Scheme Meetings).
2.The Share Scheme Meeting be held on 12 February 2021, commencing at 10 am (Sydney time),…
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- AGLC
- Re Xplore Wealth Ltd [2020] FCA 1868
- Case
- [2020] FCA 1868
- Decision Date
CaseChat Overview and Summary
The court found that the Share Scheme was not fair to shareholders because the consideration offered was lower than the pre-announcement market price of Xplore Wealth shares. However, it was reasonable and in the best interests of the shareholders, given the binding nature of the agreement with HUB24, the lack of better alternatives, and the expert's opinion that the schemes were in the best interests of Xplore Wealth. The Option Scheme was deemed reasonable and in the best interests of optionholders, as it provided a fair and certain outcome, though it was not fair due to the contingent nature of the scheme dependent on the approval of the Share Scheme. The court concluded that the schemes were of such a nature that if approved by the requisite majority, the court would likely approve them.
Accordingly, the court made the orders sought by Xplore Wealth to convene the meetings of shareholders and optionholders to consider and vote on the proposed schemes. The orders specified the manner of convening the meetings, the timing, and the voting process. The court also dispensed with certain procedural requirements to facilitate the convening of the meetings during the COVID-19 pandemic.
Orders
Orders of the court
1. Pursuant to s 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act), the plaintiff convene and hold:
(a) a meeting of its shareholders (Share Scheme Meeting) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement (Share Scheme) proposed between the plaintiff and its shareholders (Scheme Shareholders), being the scheme substantially in the form contained at Annexure A to these Orders; and
(b) a meeting of its optionholders (Option Scheme Meeting) for the purpose of considering and, if thought fit, agreeing (with or without modification) to a scheme of arrangement (Option Scheme) proposed between the plaintiff and its optionholders (Scheme Optionholders), being the scheme substantially in the form contained at Annexure B to these Orders,
(together, the Scheme Meetings).
2. The Share Scheme Meeting be held on 12 February 2021, commencing at 10 am (Sydney time), and the Option Scheme Meeting be held on 12 February 2021, commencing at 11 am (Sydney time), to be conducted electronically through an online platform (which is to be accessed in accordance with the instructions included in the Scheme Booklet substantially in the form of Annexure DS-1 to the Affidavit of Donald Sharp sworn on 17 December 2020, and as modified in paragraphs 4.1(c) at page 37, and paragraph 7.2 at page 69 as indicated during the first court hearing on 18 December 2020 (Scheme Booklet) and the notices of meeting to be sent to shareholders and optionholders in accordance with Orders 3 and 4 below).
3. The Share Scheme Meeting be convened by sending on or before 12 January 2021:
(a) an email to each Scheme Shareholder who has nominated an electronic address for the purpose of receiving notices of meeting and proxy forms from the plaintiff (Email Shareholder) (or, in the case of joint holders, to the holder whose name appears first in the plaintiff’s register) which contains:
(i) an electronic copy of the Scheme Booklet (which contains among other things the proposed Share Scheme at Annexure D and Notice of Share Scheme Meeting at Annexure H);
(ii) an electronic copy of a personalised proxy/voting form for the Share Scheme Meeting; and
(iii) an electronic link to the online portal or website that is accessible by the Email Shareholder and which enables the Email Shareholder to lodge their proxy form for the Share Scheme Meeting and voting instructions online.
(b) by post to each Scheme Shareholder who is not an Email Shareholder (or, in the case of joint holders, to the holder whose name appears first in the plaintiff's register):
(i) a postcard setting out the electronic address to a website containing a copy of the Scheme Booklet;
(ii) a hard copy personalised proxy/voting form for the Share Scheme Meeting;
(iii) a reply-paid envelope for the return of completed proxy forms;
(iv) a hard copy election form (in respect of the Share Scheme Consideration election that is to be made by entitled Scheme Shareholders); and
(v) a separate reply-paid envelope for the return of the election form.
4. The Option Scheme Meeting be convened by sending on or before 12 January 2021:
(a) an email to each Scheme Optionholder who has nominated an electronic address for the purpose of receiving notices of meeting and proxy forms from the plaintiff (Email Optionholder) (or, in the case of joint holders, to the holder whose name appears first in the plaintiff’s register) which contains:
(i) an electronic copy of the Scheme Booklet (which contains among other things the proposed Option Scheme at Annexure E and Notice of Option Scheme Meeting at Annexure I); and
(ii) an electronic link to the online portal or website that is accessible by the Email Optionholder and which enables the Email Optionholder to lodge their proxy form for the Option Scheme Meeting and voting instructions online;
(b) by post to each Scheme Optionholder who is not an Email Optionholder (or, in the case of joint holders, to the holder whose name appears first in the plaintiff's register):
(i) a postcard setting out the electronic address to a website containing a copy of the Scheme Booklet;
(ii) a hard copy personalised proxy/voting form for the Option Scheme Meeting; and
(iii) a reply-paid envelope for the return of completed proxy forms.
5. The documents referred to in Orders 3(b) and 4(b) be sent:
(a) in the case of Scheme Shareholders and Scheme Optionholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in the plaintiff’s register; and
(b) in the case of Scheme Shareholders and Scheme Optionholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in the plaintiff’s register.
6. If the plaintiff receives an automatic, system generated notification that the documents were unable to be delivered to the nominated electronic address of any Scheme Shareholder or Scheme Optionholder to whom scheme documents were dispatched in accordance with orders 3(a) and 4(a) (Undelivered Email Recipients), the documents be dispatched by the plaintiff to Undelivered Email Recipients in accordance with Orders 3(b), 4(b) and 5.
7. Except to the extent addressed by these Orders, the Share Scheme Meeting and Option Scheme Meeting be:
(a) convened, held and conducted in accordance with the Corporations (Coronavirus Economic Response) Determination (No 3) 2020 (Cth) (Determination) and subject thereto, the provisions of Pt 2G.2 of the Act that apply to members of the company, and the provisions of the plaintiff’s Constitution that are not inconsistent with these Orders, the Determination and Pt 2G.2; and
(b) convened, held and conducted as if r 2.15 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) does not apply.
8. Voting on the resolutions to approve the Share Scheme and the Option Scheme is to be conducted by way of poll.
9. A proxy form, appointment of a corporate representative, or power of attorney to act on behalf of the relevant Scheme Shareholder or Scheme Optionholder in respect of the Share Scheme Meeting and the Option Scheme Meeting respectively will be valid and effective if, and only if, it is completed and delivered in accordance with its terms and these Orders by 10 am 10 February 2021.
10. Alexander Hutchison, or failing him Donald Sharp, be Chair of the Scheme Meetings.
11. The Chair of the Scheme Meetings shall have the power to adjourn the meeting to such time, date and place he considers appropriate.
12. Compliance with r 3.4 and Form 6 of the Rules is dispensed with.
13. The plaintiff publish a notice of hearing in The Australian newspaper, in substantially the form that appears at Annexure C to these Orders, not later than five days prior to the date fixed for hearing of any application to approve the Share Scheme and the Option Scheme.
14. The originating process is adjourned for hearing before Markovic J on 18 February 2021 at 10.15 am (Sydney Time).
15. There be liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Each Scheme Shareholder can elect to receive consideration for their shares in one of two forms: either cash consideration in the amount of $0.20 per Xplore Wealth share (Cash Consideration); or scrip consideration in the amount of 0.00926746 of HUB24 shares per Xplore Wealth share (Scrip Consideration) (collectively, Share Scheme Consideration). If no election is made by a Scheme Shareholder as to the preferred form of Share Scheme Consideration, that shareholder will receive the “Default Consideration”, namely 50% Cash Consideration and 50% Scrip Consideration. Scheme Shareholders whose address in the share register is located outside of Australia or New Zealand (Foreign Scheme Shareholders) may only receive Cash Consideration. Similarly, Scheme Shareholders who are only entitled to less than a marketable parcel of HUB24 shares (being equal to a value of less than $500 under the Share Scheme) (Small Shareholders) may only receive Cash Consideration, regardless of whether or not they make an election. There is an aggregate cap of Cash Consideration of $36 million and an aggregate cap of Scrip Consideration of $30 million worth of HUB24 shares. If the Scheme Shareholders elect to receive Cash Consideration or Scrip Consideration that exceeds those aggregate caps, then a scale-back mechanism will apply. Where Cash Consideration is scaled back, the shortfall will be made up of Scrip Consideration and vice versa. The Share Scheme is not contingent on approval of the Option Scheme. If the Share Scheme is approved and the Option Scheme is not, then the Share Scheme will proceed. However, the Option Scheme will not. Option Scheme Xplore Wealth has issued 22,103,549 options under an employee share option plan (ESOP) and an executive share option plan (XSOP). There are approximately 83 optionholders. The options issued by Xplore Wealth were issued in tranches pursuant to the ESOP and XSOP. Under the Option Scheme, persons holding options (Scheme Options) as at the scheme record date, being 23 February 2021, will have their options cancelled and will be paid consideration in the following amounts: The Option Scheme is contingent on the Share Scheme being approved. If the Share Scheme is not approved, then the Option Scheme will not proceed and optionholders will continue to hold their shares and options respectively. If the Share Scheme is approved and the Option Scheme is not approved, then the Option Scheme will not proceed. In those circumstances, the options held by optionholders will lapse unless they are exercised within one month of the “Implementation Date” (as defined) of the Share Scheme. Where the options are exercised, the resulting shares may be compulsorily acquired by HUB24 pursuant to Pt 6A.2 of the Act because HUB24 will hold more than 90% of the securities in Xplore Wealth.Independent expert’s report The directors of Xplore Wealth retained Leadenhall Corporate Advisory Pty Ltd (LCA) to provide an independent expert’s report (IER) in respect of the Schemes.