Selfwealth Ltd, in the matter of Selfwealth Ltd
[2025] FCA 214
•14 March 2025
FEDERAL COURT OF AUSTRALIA
Selfwealth Ltd, in the matter of Selfwealth Ltd [2025] FCA 214
File number(s): VID 77 of 2025 Judgment of: O'BRYAN J Date of judgment: 14 March 2025 Date of publication of reasons: 20 March 2025 Catchwords: CORPORATIONS – scheme of arrangement – first court hearing – order sought under s 411(1) of the Corporations Act 2001 (Cth) – exercise of discretion to order convening of scheme meeting – consideration of order to permit the postponement of the meeting – orders made for convening meeting Legislation: Corporations Act 2001 (Cth) ss 411, 412, 1319
Corporations Regulations 2001 (Cth) reg 5.1.01, Sch 8
Federal Court (Corporations) Rules 2000 (Cth) rr 1.3, 2.4, 3.2, 3.3
Cases cited: Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69
Re ACM Gold Ltd (1992) 34 FCR 530
Re Amcor Ltd [2019] FCA 346
Re Carbon Revolution Limited (No 2) [2023] FCA 1173
Re Crown Resorts Ltd [2022] FCA 367
Re DuluxGroup Ltd [2019] FCA 961
Re Foundation Healthcare Ltd [2002] FCA 742
Re Japara Healthcare Limited [2021] FCA 1150
Re Lonsdale Financial Group Ltd [2007] VSC 394
Re Macquarie Private Capital A Ltd [2008] NSWSC 323
Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82
Re Opes Prime Stockbroking Ltd (2009) 179 FCR 20
Re PM Capital Asian Opportunities Fund Limited [2021] FCA 1380
Re QMS Media [2019] FCA 2172
Re Rex Minerals Limited [2024] FCA 1051
Re Verdant Minerals Ltd [2019] FCA 556
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 64 Date of hearing: 14 March 2025 Counsel for the Plaintiff: B K Holmes Solicitors for the Plaintiff: Herbert Smith Freehills Counsel for Svava Pte Ltd: C Möller SC Solicitors for Svava Pte Ltd: Hamilton Locke ORDERS
VID 77 of 2025 IN THE MATTER OF SELFWEALTH LTD (ACN 154 324 428)
SELFWEALTH LTD (ACN 154 324 428)
Plaintiff
SVAVA PTE LTD
Interested Person
ORDER MADE BY:
O'BRYAN J
DATE OF ORDER:
14 MARCH 2025
OTHER MATTERS:
A.The Court notes that the Australian Securities and Investments Commission (ASIC) was provided with at least 14 days’ notice of the hearing of this application.
B.The Court is satisfied that ASIC has had a reasonable opportunity to:
(a)examine the terms of the proposed scheme of arrangement to which the application relates (Scheme) and a draft explanatory statement relating to that Scheme; and
(b)make submissions to the Court in relation to the Scheme and the draft explanatory statement.
C.The Court notes the letter from ASIC to the directors of the plaintiff (Selfwealth) dated 13 March 2025 produced at the hearing.
THE COURT ORDERS THAT:
1.Pursuant to subs 411(1) and s 1319 of the Corporations Act 2001 (Cth) (Act), Selfwealth convene and hold a meeting (Scheme Meeting) of its members holding fully paid ordinary shares (other than Svava Pte Ltd and any of its related bodies corporate which hold fully paid ordinary shares in Selfwealth) (Selfwealth Shareholders):
(a)for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed Scheme between Selfwealth and the Selfwealth Shareholders, the terms of which are set out in Annexure A to these orders; and
(b)to be held on 22 April 2025 commencing at 10.30 am (Melbourne time) at the offices of Herbert Smith Freehills, Level 24, 80 Collins Street, Melbourne, Victoria.
2.Pursuant to subs 411(1) and s 1319 of the Act, the Scheme Meeting be convened by sending on or before 20 March 2025 to each Selfwealth Shareholder:
(a)in the case of shareholders who have elected to receive communications from Selfwealth by email (Email Shareholders), an email substantially in the form of the template emails at pages 179 to 182 of Annexure CK2 to the affidavit of Craig Keary affirmed on 12 March 2025 (Second Keary Affidavit) which contains a hyperlink to a website from which the Email Shareholder may:
(i)access and download an electronic copy of a document substantially in the form which appears at pages 12 to 178 of Annexure CK2 to the Second Keary Affidavit as amended in the manner set out in Annexure RAL4 to the affidavit of Rodd Ashton Levy sworn on 13 March 2025 (Scheme Booklet); and
(ii)lodge online an electronic form containing a proxy appointment; and
(b)in the case of shareholders who have elected to receive communications from Selfwealth in physical form (Hard Copy Shareholders), the following documents in hard copy:
(i)the Scheme Booklet;
(ii)a personalised proxy form (Proxy Form); and
(iii)a business reply-paid envelope (or, in the case of Selfwealth Shareholders with registered addresses outside of Australia, a self‑addressed envelope) for the return of completed Proxy Forms.
(c)in the case of shareholders who are not Email Shareholders or Hard Copy Shareholders (Non-Electing Shareholders), the following documents in hard copy:
(i)a letter substantially in the form which appears at pages 183 to 184 of Annexure CK2 to the Second Keary Affidavit which contains a URL address of a website from which the Non-Electing Shareholder may:
A.access and download an electronic copy of the Scheme Booklet; and
B.lodge online an electronic form containing a proxy appointment;
(ii)a personalised Proxy Form; and
(iii)a business reply-paid envelope (or, in the case of Selfwealth Shareholders with registered addresses outside of Australia, a self‑addressed envelope) for the return of completed Proxy Forms.
3.If it comes to the attention of Selfwealth that any email dispatched to Email Shareholders in accordance with order 2(a) above has returned an undeliverable or undelivered receipt for an Email Shareholder’s nominated email address, Selfwealth is to dispatch to that Email Shareholder within a reasonable time thereafter the hard copy letter referred to in order 2(c) above.
4.The documents referred to in orders 2(b), 2(c) and 3 be sent:
(a)in the case of shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in Selfwealth’s share register; and
(b)in the case of shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in Selfwealth’s share register.
5.A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, a Proxy Form is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the instructions on the website referred to in orders 2(a) and (c) and received by Selfwealth by 10.30 am (Melbourne time) on 20 April 2025.
6.Christine Christian or, failing her, Paul Clark, be chairperson of the Scheme Meeting.
7.Voting on the resolution to agree to the Scheme is to be conducted by way of a poll.
8.Selfwealth Shareholders whose names are recorded in the register of members of Selfwealth at 7.00 pm (Melbourne time) on 20 April 2025 will be eligible to vote at the Scheme Meeting.
9.The chairperson of the Scheme Meeting shall have the power to adjourn the Scheme Meeting to such time, date and place as she or he considers appropriate and, in that event, only Selfwealth Shareholders whose names are recorded in the register of members of the Selfwealth at 7.00 pm (Melbourne time) on the date that is two calendar days before the date that the adjourned meeting resumes will be eligible to vote at the Scheme Meeting.
10.Selfwealth shall have power to postpone the Scheme Meeting to such time, date and place as it considers appropriate in accordance with its Constitution and, in that event, notwithstanding any other part of these orders:
(a)only Selfwealth shareholders whose names are recorded in the register of members of the Selfwealth at 7.00 pm (Melbourne time) on the date that is two calendar days before the date of the postponed meeting will be eligible to vote at the Scheme Meeting;
(b)a proxy in respect of the Scheme Meeting will be valid and effective if, and only if, a Proxy Form is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the instructions on the website referred to in orders 2(a) and (c) and received by Selfwealth at least 48 hours before the time scheduled for the commencement of the postponed Scheme Meeting; and
(c)a reference in these orders to the Scheme Meeting is taken to include a reference to the postponed meeting.
11.Pursuant to r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth), compliance with rr 2.4(1), 2.15, 3.4 and Form 6 is dispensed with.
12.Selfwealth is to publish an announcement via the ASX Market Announcements Platform substantially in the form at page 218 of Annexure CK2 to the Second Keary Affidavit which sets out the details for the hearing of any application to approve the Scheme and the process for any person wishing to appear at that hearing to oppose the approval of the Scheme.
13.The notice referred to in order 12 must be published at least 5 days before the date of the hearing of any application to approve the Scheme.
14.The further hearing of the originating process is adjourned to the Honourable Justice O’Bryan at 2.15 pm (Melbourne time) on 28 April 2025 for the hearing of any application to approve the Scheme.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ANNEXURE A
Scheme
[The Order entered is available on the Commonwealth Courts Portal, which attaches the Scheme.]
REASONS FOR JUDGMENT
O’BRYAN J:
Introduction
By originating process filed on 29 January 2025, the plaintiff, Selfwealth Ltd (Selfwealth), sought orders pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act) to convene and hold a meeting of its shareholders (Scheme Meeting) to consider and, if thought fit, agree to a proposed scheme of arrangement (Scheme) between Selfwealth and its shareholders.
The commercial purpose of the Scheme is to effect the acquisition of all of Selfwealth’s shares by Svava Pte Ltd, the holding company of the Syfe Group, other than shares in Selfwealth already held by Svava. In their evidence and written submissions, the parties have referred to Svava Pte Ltd as Syfe, which nomenclature I adopt in these reasons. For the avoidance of doubt however, I note that it is the Svava entity that is party to the Scheme Implementation Deed, is to acquire the Selfwealth shares under the Scheme, and has executed a Deed Poll undertaking to perform the actions attributed to it under the Scheme Implementation Deed.
Selfwealth is an Australian public company limited by shares. Selfwealth has been admitted to the official list of the Australian Securities Exchange (ASX), and Selfwealth shares are quoted for trading on the ASX. Syfe is a private company limited by shares and registered in Singapore.
If the Scheme is approved and implemented:
(a)Syfe will acquire all of the Selfwealth shares held by Selfwealth shareholders (other than any shares already held by Syfe or any of its related bodies corporate) on the Scheme Record Date (which is 7pm on the second business day after the Scheme becomes effective, or other such time agreed by Selfwealth and Syfe) (Scheme Shares);
(b)Selfwealth shareholders as at the Scheme Record Date (Scheme Shareholders) will receive $0.28 cash per Scheme Share held (the Scheme Consideration); and
(c)Selfwealth will become a wholly-owned subsidiary of Syfe, and Selfwealth will apply to the ASX for termination of the official quotation of Selfwealth shares on the ASX and for Selfwealth to be removed from the official list of the ASX.
Syfe holds approximately 18.8% of the total number of Selfwealth shares on issue, being 43,444,137 out of a total number of 230,914,851 Selfwealth shares on issue. Syfe and any of its related bodies corporate which holds Selfwealth shares is an “Excluded Shareholder” under the Scheme, will not participate in the Scheme and will not be entitled to vote at the Scheme Meeting.
The Scheme Meeting is proposed to be held at 10.30 am on 22 April 2025 at Herbert Smith Freehills, Level 24, 80 Collins Street, Melbourne, Victoria. Selfwealth shareholders will be able to vote in person, by proxy, by attorney or by corporate representative, and will have the ability to ask questions in person at the Scheme Meeting, or submit questions online in advance.
It is proposed that Christine Christian, Chair of the Selfwealth Board, will chair the Scheme Meeting. Should Ms Christian be unable to perform that role, it is proposed that Paul Clark, Deputy Chair of the Selfwealth Board, will chair the Scheme Meeting.
On 14 March 2025, I made orders convening the Scheme Meeting. These are my reasons for making those orders.
Background
On 24 November 2024, Selfwealth entered into a scheme implementation deed with Bell Financial Group Limited (Bell) providing for Bell to acquire all of the shares in Selfwealth for $0.25 cash per share, with a scrip consideration alternative (Bell Scheme). The first court hearing in relation to the Bell Scheme took place on 20 February 2025, immediately after which I made orders which provided for the Bell Scheme meeting to be held on 28 March 2025.
At the time that the 20 February 2025 orders were made, Selfwealth had received a non-binding and indicative proposal from Syfe to acquire all of the shares in Selfwealth for $0.28 cash per Selfwealth share. The Bell Scheme booklet accordingly addressed the Syfe proposal and its potential implications for the Bell Scheme. In circumstances where, at that point in time, the Syfe proposal was indicative only, non-binding, and may not have proceeded, I considered it appropriate to make orders convening a meeting of the members of Selfwealth to consider the Bell Scheme (consistently with the observations of Beach J in Re PM Capital Asian Opportunities Fund Limited [2021] FCA 1380 (at [89]-[92]) and in Re Carbon Revolution Limited (No 2) [2023] FCA 1173 (at [87]-[92])). That would ensure that Selfwealth could comply with its obligations under the Bell scheme implementation deed and enable Selfwealth members to consider the Bell Scheme, while Selfwealth continued to engage with Syfe in relation to its non-binding proposal.
On 24 February 2025, Selfwealth announced to the ASX that a binding proposal had been made by Syfe to acquire all Selfwealth shares not already held by Syfe for $0.28 cash per share. Bell was provided with the opportunity to match that offer under the matching rights provisions of the Bell scheme implementation deed. However, on 26 February 2025, Bell advised Selfwealth that it would not be making a counterproposal, and the Bell scheme implementation deed was terminated. On 27 February 2025, Selfwealth announced to the ASX that it had entered into the Scheme Implementation Deed with Syfe.
In light of these developments, on 28 February 2025 Selfwealth contacted my chambers seeking orders vacating the 20 February 2025 orders in relation to the Bell Scheme and adjourning the proceeding to a first court hearing in relation to the Syfe scheme. In support of the orders sought, Selfwealth filed an affidavit of Rodd Ashton Levy sworn on 28 February 2025, which summarised the developments that had occurred since the hearing on 20 February 2025. On Tuesday 4 March 2025, I made orders as sought by Selfwealth.
Overview of the Scheme
Selfwealth operates an Australian online trading platform which provides customers with opportunities to trade across Australian, United States and Hong Kong markets. Selfwealth's platform also provides customers with access to investment and research tools, market news, and a tailored peer-to-peer network allowing customers to track the portfolio performance of other customers, in real time, on a depersonalised basis. Selfwealth’s registered office is in Victoria.
Syfe Group operates digital investment and savings platforms which offer fully managed portfolios, cash management and share trading services in Singapore, Hong Kong and Australia. Syfe Group’s products and services include managed portfolios, share trading platforms for trading stocks and exchange traded funds, as well as cash management and private wealth services.
On 27 February 2025, Selfwealth announced to the ASX that it had entered into a Scheme Implementation Deed with Syfe dated 27 February 2025. The Deed provides for Syfe to acquire all Selfwealth shares not already held by Syfe (or a related body corporate) for $0.28 cash per Selfwealth Share. As stated earlier, Syfe holds approximately 18.8% of the total number of Selfwealth shares on issue. Syfe and any of its related bodies corporate which holds Selfwealth shares is an “Excluded Shareholder” under the Scheme, will not participate in the Scheme and will not be entitled to vote at the Scheme Meeting.
As at 14 February 2025, Selfwealth had on issue 230,914,851 fully paid ordinary shares. Selfwealth does not have any equity incentives or performance rights on issue.
Syfe is not a party to the Scheme and cannot be directly bound by it (relevantly, under s 411 of the Act, a scheme is between a company and its members). The established practice in these circumstances is to require the entity providing the scheme consideration to execute a deed poll in favour of scheme shareholders. That practice has been followed in this case. On 28 February 2025, Syfe executed a deed poll (the Deed Poll) under which it covenants to provide to Selfwealth the aggregate amount of the Scheme Consideration payable to Scheme Shareholders by no later than 5pm on the business day prior to the date the Scheme is implemented, and to undertake all other actions attributed to it under the Scheme.
Selfwealth has prepared a draft scheme booklet (Scheme Booklet) which sets out a detailed description of the Scheme and its advantages and disadvantages. The Australian Securities and Investments Commission (ASIC) was provided with the draft Scheme Booklet on 6 March 2025, and on 13 March 2025 ASIC provided Selfwealth’s solicitors with a letter in the usual form, known as a “preliminary no objection letter”. The letter stated that, based on ASIC’s examination of the terms of the Scheme and the Scheme Booklet, ASIC does not currently propose to appear at the first court hearing to make submissions or intervene to oppose the Scheme. Consistently with that statement, ASIC did not appear at the first court hearing.
The Scheme Booklet records the unanimous recommendation of all Selfwealth directors that Scheme Shareholders vote to approve the Scheme, and that all Selfwealth directors intend to vote all Selfwealth shares held or controlled by them in favour of the Scheme, subject to: (a) there being no “superior proposal” within the meaning of the Scheme Implementation Deed; and (b) an independent expert concluding (and continuing to conclude) in its expert report that the Scheme is in the best interests of Scheme Shareholders. The Scheme Booklet contains annexures including a Notice of Scheme Meeting, the Scheme, the Deed Poll and an independent expert report (the Expert Report) of Grant Thornton Corporate Finance Australia Pty Ltd (Grant Thornton). The Expert Report records the opinion of Grant Thornton that the Scheme is fair and reasonable and is therefore in the best interests of Scheme Shareholders (other than Excluded Shareholders). The Scheme Booklet also addresses the circumstances surrounding the termination of the Bell scheme implementation deed.
Relevant principles
Part 5.1 of the Act provides a procedure whereby an arrangement between a company and its members can be made binding on all members. Section 411 is the principal provision. The procedure involves three main steps:
(a)an application to the Court for an order to convene a scheme meeting (s 411(1));
(b)if such an order is made, the convening of such a meeting at which a resolution to agree to the scheme is considered (s 411(4)(a)); and
(c)if the resolution is passed by the necessary majorities, an application to the Court for an order approving the scheme (ss 411(4)(b) and 411(6)).
The present application concerns the first stage, being an application to the Court for an order to convene the Scheme Meeting. Section 411 of the Act confers a discretion on the Court to make an order convening the Scheme Meeting if certain statutory conditions are met, namely:
(a)an arrangement is proposed between a Pt 5.1 body and its members or any class of them (s 411(1));
(b)an application for the order is made in a summary way by that body (s 411(1));
(c)14 days’ notice of the hearing of the application has been given to ASIC (or such lesser period as the Court or ASIC permits) (s 411(2)(a)); and
(d)the Court is satisfied that ASIC has had a reasonable opportunity to:
(i)examine the terms of the proposed arrangement to which the application relates and a draft explanatory statement relating to the proposed arrangement; and
(ii)make submissions to the Court in relation to the proposed arrangement and the draft explanatory statement required by s 412 (ss 411(2)(b) and 411(3)).
In addition to these requirements of s 411, the procedure is regulated by s 412 of the Act and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), and by the Federal Court (Corporations) Rules 2000 (Cth) (Rules). The Regulations and the Rules prescribe certain information which is required to be sent to the members about the Scheme.
The principles which apply to the exercise of the Court’s discretion at this first stage are well-known. In Re Amcor Ltd [2019] FCA 346 (Amcor), Beach J described the Court’s role at the first court hearing as follows (at [47], emphasis in original):
My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J).
It is not the Court’s role to usurp the shareholders’ decision whether to agree to a scheme. The question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members to assess, and they ought not be prevented from having the opportunity to do so, provided that the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on: Re Crown Resorts Ltd [2022] FCA 367 (Crown Resorts) at [27], citing Amcor at [50] and Re ACM Gold Ltd (1992) 34 FCR 530 at 534.
Therefore, if the arrangement is one that seems fit for consideration by the meeting of members, and is a commercial proposition likely to gain the Court’s approval if passed by the necessary majorities, then orders should be made to convene the meeting: Re Foundation Healthcare Ltd [2002] FCA 742; 42 ACSR 252 (Foundation Healthcare) at [36].
In summary, the Court’s task at the first court hearing is to assess first, whether the statutory prerequisites to the making of orders convening a meeting have been met and second, whether it is appropriate for the Court to exercise its discretion in favour of making those orders. Each of those matters is considered in turn.
Power to make orders under s 411
Selfwealth submitted, and I am satisfied, that all relevant statutory prerequisites have been satisfied.
First, Selfwealth, being a company registered under the Act, is a “Part 5.1 body” and I am satisfied that the proposed Scheme is an “arrangement” between Selfwealth and its shareholders for the purpose of s 411 of the Act.
Second, Selfwealth has made this application to the Court.
Third, ASIC has had a reasonable opportunity to examine the terms of the proposed Scheme and the draft explanatory statement (contained in the Scheme Booklet) and to make submissions to the Court. As stated above, ASIC was provided with a draft Scheme Booklet on 6 March 2025 and, on 13 March 2025, provided Selfwealth’s solicitors with a letter in the usual form, known as a “preliminary no objection letter”. ASIC did not appear at the first court hearing to make submissions or intervene to oppose the Scheme. ASIC has been given notice of the first court hearing in accordance with s 411(2)(a). As stated above, s 411(2)(a) requires that 14 days’ notice of the hearing of this application must be given to ASIC, or such lesser period of notice as the Court or ASIC permits. ASIC was given notice of the date of the hearing of this application on 4 March 2025. On 28 February 2025, in anticipation of this listing, ASIC advised Selfwealth’s solicitors that it would permit less than 14 days’ notice of the first Court hearing in relation to the Scheme for the purposes s 411(2)(a), while reserving ASIC’s discretion to request that the hearing be delayed in the event that ASIC later determines that it requires the full 14 days’ notice. In its “preliminary no objection letter” dated 13 March 2025, ASIC confirmed its position that it would permit the shorter notice period.
Fourth, as to compliance with the Rules:
(a)the evidence relied upon by Selfwealth includes an ASIC company extract recording the results of a search of the records of ASIC in relation to Selfwealth carried out no earlier than seven days before the originating process was filed, as required by r 2.4(2);
(b)the necessary evidence about the proposed chairperson and alternate chairperson of the Scheme Meeting has been provided, as required by r 3.2; and
(c)a copy of the Scheme is annexed to the orders convening the Scheme Meeting, as required by r 3.3(1).
Fifth, as to compliance with the Regulations, s 412(1) of the Act and Sch 8 (Pt 3) of the Regulations set out the disclosure requirements of the explanatory statement (which is contained in the Scheme Booklet). I am satisfied that each of the three aspects to the requirements of s 412(1) has been fulfilled.
In light of the procedural requirements having been satisfied, the Court’s discretion to make the convening orders is enlivened.
Exercise of the Court’s discretion
The relevant discretionary consideration involves two main questions:
(a)first, whether the Scheme is fit for consideration by the members: see for example FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72 (Street CJ) and Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504; and
(b)second, whether the members are to be properly informed as to the nature of the Scheme: see Re NRMA Insurance Ltd (No 1) [2000] NSWSC 82; 156 FLR 349 at [30]; Foundation Healthcare at [38].
The Scheme is fit for consideration
In addressing the first question of whether a scheme is fit for consideration by the members, the Court will scrutinise the terms of the scheme to satisfy itself that the scheme is of such a nature and cast in such terms that, if agreed to at the Scheme Meeting, the Court would be likely to approve the scheme at the second court hearing.
In the context of schemes for the transfer of all of the shares in a company to an acquirer, the Court will also scrutinise the terms of the agreement between the company and the acquirer to implement the scheme (which in this case is recorded in the Scheme Implementation Deed). Typically, the company and the acquirer agree commercial terms governing their negotiations and dealings, including such matters as representations and warranties, exclusivity arrangements, break fees if the transaction does not proceed and the funding arrangements for the proposed transaction. Strictly, commercial terms of that kind are not part of the scheme and do not form any part of the arrangements that are approved by shareholders pursuant to the scheme. They are a commercial arrangement between the company and the acquirer. The appropriateness of such commercial terms is a matter for the business judgment of the directors of the company. However, the Court will seek to ensure that the terms agreed between the company and the acquirer have no potential to cause prejudice or unfairness to the company’s shareholders in connection with their consideration of the scheme and the implementation of the scheme if it is approved.
Terms of the Scheme
The Scheme proposal is fit for consideration by the members of Selfwealth. As noted earlier, the question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members to assess. The terms of the Scheme are in standard form and do not raise any specific matters of concern from the perspective of shareholders.
Funding of the Scheme Consideration
If the Scheme is implemented, the total amount of Scheme Consideration payable by Syfe for the Scheme Shares will be approximately $52,491,800. The Scheme Booklet states that Syfe will fund the Scheme Consideration from existing cash resources and that Syfe currently holds an amount of cash in its US$ denominated bank account with United Overseas Bank Limited which exceeds the total Scheme Consideration, and these funds are unconditionally available to Syfe for the purpose of meeting its obligations under the Scheme. Syfe’s Chief Operating Officer, Samantha Horton, deposed to the steps taken by Syfe to verify the information in the Scheme Booklet that related specifically to Syfe, including the information regarding funding of the Scheme Consideration. On the basis of that evidence, I am satisfied that Syfe will have sufficient funding to finance the Scheme Consideration.
Performance risk
In considering whether to approve a scheme involving the participation of a person other than the plaintiff company and its members (here, Syfe), it is important to ensure that the other party is bound to perform the role assigned to it and that its obligations are able to be enforced. In Re DuluxGroup Ltd [2019] FCA 961 I observed, at [25]:
… the entity that will be providing the Scheme Consideration is not party to the Scheme and is not (and cannot be) directly bound by it. As such, its obligations do not depend upon s 411 of the Act, which is confined to the obligations of the plaintiff company and its members: Re Westfield Holdings Ltd (2004) 49 ACSR 734 at 739. In considering whether to approve a scheme involving the participation of a person other than the plaintiff company and its members …, it is important to ensure that that other party is bound to perform the role assigned to it and that its obligations are able to be enforced. In this context, the courts have considered the “performance risk” as regards the obligations to be performed by the non-scheme party: see for example Re Amcor Ltd [2019] FCA 346 at [53]; Re Coles Group Ltd (2007) 25 ACLC 1380 at 1386 [38]; Re Lonsdale Financial Group Ltd [2007] VSC 394 at [42]; Re KAZ Group Ltd [2004] FCA 738 at [4]-[5]; Re Healthscope Ltd [2010] VSC 367 at [31]-[32]; Re Mitchell Communication Group [2010] VSC 423 at [30]-[31]; Re AWB Ltd [2010] VSC 456 at [16]; and Re AXA Asia Pacific Holdings Ltd [2011] VSC 4 at [21]-[25].
I accept Selfwealth’s submission that the Scheme effectively eliminates any performance risk by adopting the following safeguards:
(a)first, the terms of the Scheme provide that the transfer of the Scheme Shares to Syfe is subject to the Scheme Consideration having first been provided to Scheme Shareholders in accordance with cl 5 of the Scheme. The terms of the Scheme ensure that there is no risk that shareholders will be required to transfer their shares without receiving the promised consideration. This effectively eliminates any performance risk in so far as the transfer of the Scheme Shares is concerned; and
(b)secondly, consistently with usual practice, the Scheme Implementation Deed required Syfe to enter into a deed poll in favour of Scheme Shareholders, which binds Syfe to perform the actions attributed to it under the Scheme, including the provision of the Scheme Consideration. In performance of this obligation, Syfe has executed the Deed Poll in favour of Scheme Shareholders which contains an undertaking by Syfe to provide the Scheme Consideration to which Scheme Shareholders are entitled if the Scheme becomes effective.
Break fees, exclusivity provisions, and representations and warranties
The Scheme Implementation Deed entered into between Selfwealth and Syfe contains commercial terms governing their negotiations and dealings in respect of the Scheme transaction, including such matters as representations and warranties, exclusivity arrangements (comprising "no shop", "no talk" and "no due diligence" restrictions that apply to Selfwealth, together with a "notification obligation" and "matching right" for Syfe’s benefit), and the payment of a break fee by Selfwealth to Syfe if the transaction does not proceed.
As stated earlier, those commercial terms are not strictly part of the Scheme and do not form any part of the arrangements that are approved by shareholders pursuant to the scheme. They are a commercial arrangement between Selfwealth and Syfe. The appropriateness of such commercial terms is a matter for the business judgment of the directors of those companies. However, the Court will seek to ensure that the terms have no potential to cause prejudice or unfairness to Selfwealth’s shareholders in connection with their consideration of the Scheme and the implementation of the Scheme if it is approved.
In this regard, I accept Selfwealth’s submissions that:
(a)the Scheme Implementation Deed includes customary break fee and exclusivity provisions on terms which accord with the well-known principles set out in the authorities: see for example Re Japara Healthcare Limited [2021] FCA 1150; 156 ACSR 695 and the authorities cited therein;
(b)the break fee represents approximately 1% of the equity value of Selfwealth, which accords with what is considered ‘reasonable’ in the Takeovers Panel Guidance Note No. 7 Deal Protection (August 2023) (Guidance Note) (at [48]), which has been referred to by courts in the context of schemes of arrangement in a number of cases: see for example Re QMS Media [2019] FCA 2172 at [60] and the authorities cited therein. I also note that the break fee triggers contemplated in cl 13.2 of the Scheme Implementation Deed are of types that are considered ‘reasonable’ in the Guidance Note (at [48]); and
(c)the exclusivity provisions are in a conventional form that have been accepted in many schemes of arrangement, and contain the usual fiduciary carve-outs and matching-right provisions.
Director interests
Only one of the four directors of Selfwealth holds shares in Selfwealth, and no Selfwealth director has a relevant interest in any securities in Syfe. There is no payment or other benefit that is proposed to be made or given to any director of Selfwealth as compensation for the loss of, or consideration for or in connection with their retirement from, office in Selfwealth in connection with the Scheme. No Selfwealth director has agreed to receive, or is entitled to receive, any benefit from Syfe which is conditional on, or is related to, the Scheme.
Members are to be properly informed
The second principal matter relevant to the exercise of the Court’s discretion to convene a scheme meeting is the adequacy of the information to be provided to shareholders. As noted above, s 412(1) of the Act and Sch 8 (Pt 3) of the Regulations set out the disclosure requirements of the explanatory statement (which in this case is contained in the Scheme Booklet). If the Court is satisfied that the statutory disclosure requirements are met, it will ordinarily be satisfied that the information to be provided to shareholders is adequate for the purposes of the exercise of the Court’s discretion to convene a meeting: see for example Re Opes Prime Stockbroking Ltd (2009) 179 FCR 20 at [94]-[99] and [102].
Each of Selfwealth and Syfe have adduced evidence concerning the verification, by each company, of the information contained in the Scheme Booklet. Selfwealth’s Chief Executive Officer, Craig Keary, deposed to the steps taken by Selfwealth to verify all information in the Scheme Booklet (other than information that related specifically to Syfe), which steps involved senior executives of Selfwealth and its legal advisers. Syfe’s Chief Operating Officer, Samantha Horton, deposed to the steps taken by Syfe to verify the information in the Scheme Booklet that related specifically to Syfe, which steps involved senior executives of Syfe and its legal advisers.
As the Scheme is solely a members’ scheme, it is necessary that the explanatory statement be registered by ASIC before the notice of meeting is sent to Selfwealth shareholders: s 412(6) of the Act. Before registering the statement, ASIC must conclude that it appears to comply with the requirements of the Act and must form the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form and context where it appears: s 412(8) of the Act. Selfwealth has provided the draft Scheme Booklet to ASIC.
Schemes of arrangement are not required to be the subject of a report by an independent expert unless the parties have a common director or the acquiring company controls 30% of the scheme company: see reg 5.1.01 and Sch 8, cl 8303 of the Regulations. Neither is applicable to the Scheme in this case. Nevertheless, as stated above, Selfwealth has obtained a report from Grant Thornton as to whether, in its opinion, the Scheme is in the best interests of Selfwealth shareholders. Grant Thornton has expressed the opinion that the Scheme is fair and reasonable and in the best interests of Selfwealth shareholders in the absence of a superior proposal emerging.
Section 411(17) of the Act
The Court’s power to approve a scheme is restricted by s 411(17) of the Act, which provides:
The Court must not approve a compromise or arrangement under this section unless:
(a)it is satisfied that the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6; or
(b) there is produced to the Court a statement in writing by ASIC stating that ASIC has no objection to the compromise or arrangement;
but the Court need not approve a compromise or arrangement merely because a statement by ASIC stating that ASIC has no objection to the compromise or arrangement has been produced to the Court as mentioned in paragraph (b).
This is a matter which affects the final approval of the Scheme, rather than the making of an order to convene a scheme meeting: Re Macquarie Private Capital A Ltd [2008] NSWSC 323; 26 ACLC 366 at [27].
Schemes of arrangement which effect an acquisition of all of the shares in a company will usually raise a question whether the arrangement has been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6, as per s 411(17)(a). For that reason, the company will usually request that ASIC provide a statement in writing that ASIC has no objection to the compromise or arrangement for the purposes of s 411(17)(b), and a copy of that statement will be tendered at the second court hearing. ASIC’s “Regulatory Guide 60 – Schemes of arrangement” (RG 60) states (at [104] and [106]) that, at the second court hearing, ASIC will provide a statement under s 411(17)(b) if:
(a)all material information relating to the proposed scheme has been disclosed to ASIC;
(b)the standard of disclosure to all members fulfils the requirements under reg 5.1.01 and Sch 8 of the Regulations;
(c)the standard of disclosure to, and treatment of, all members is equivalent to the standard that would be required by the disclosure requirements and the principles in s 602 of the Act relating to the target securities in a takeover bid; and
(d)there are no other reasons to oppose the scheme (e.g. public policy grounds) and the other matters referred to in RG 60 have been complied with.
Section 411(17) does not present a bar to a meeting being convened at the first court hearing if it seems likely that ASIC will produce the relevant statement at the second court hearing: Re Lonsdale Financial Group Ltd [2007] VSC 394 at [40]. In the present case, ASIC does not oppose the application for convening the meeting. It is therefore appropriate to proceed on the basis that ASIC will in due course provide a statement for the purpose of s 411(17)(b).
Conclusion on exercise of discretion
I am satisfied that the Scheme is of such a nature and cast in such terms that, if it achieves the statutory majorities at the Scheme Meeting, the Court would be likely to approve it, and that the Scheme Booklet will properly inform members as to the nature of the Scheme. It is therefore appropriate to make the orders sought convening the Scheme Meeting.
Explanatory statement
Approval by the Court of the explanatory statement
Subsection 411(1) provides that, if the Court has made an order convening a meeting or meetings of members or creditors, the Court “may approve the explanatory statement” (which in this matter is contained in the Scheme Booklet). The practice of courts varies in this respect. Consistent with recent practice in this Court, I have not made an order approving the Scheme Booklet: see Amcor at [114]-[115] and Re Verdant Minerals Ltd [2019] FCA 556 at [84].
Dispatch of the explanatory statement
Selfwealth sought orders to convene the Scheme Meeting by sending the following documents to each Selfwealth shareholder:
(a)in the case of Selfwealth shareholders who have elected to receive shareholder communications electronically (Email Shareholders), an email which contains a hyperlink to an online portal and website from which the Email Shareholder may: (i) access and download an electronic copy of the Scheme Booklet; and (ii) lodge online a proxy form for the Scheme Meeting;
(b)in the case of Selfwealth shareholders who have elected to receive hard copy shareholder communications (Hard Copy Shareholders), the following documents in hard copy: (i) the Scheme Booklet; (ii) a personalised proxy form; and (iii) a business reply-paid envelope (or, in the case of Selfwealth shareholders with registered addresses outside of Australia, a self-addressed envelope) for the return of the proxy form; and
(c)in the case of Selfwealth shareholders who are not Email Shareholders or Hard Copy Shareholders (Non-Electing Shareholders), the following documents in hard copy: (i) a letter which contains the URL address of websites from which the Non-Electing Shareholder may: (A) access and download an electronic copy of the Scheme Booklet; and (B) lodge online an electronic form for the Scheme Meeting; (ii) a personalised proxy form; and (iii) a business reply-paid envelope (or, in the case of Selfwealth shareholders with registered addresses outside of Australia, a self-addressed envelope) for the return of the proxy form.
These documents in respect of the Hard Copy Shareholders and Non-Electing Shareholders will be sent:
(a)in the case of shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in Selfwealth’s share register; and
(b)in the case of shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in Selfwealth’s share register.
I am satisfied that those methods of sending the meeting documents to Selfwealth shareholders comply with the requirements of Div 2 of Pt 1.2AA of the Act.
I have also made an order sought by the parties to the effect that, if it comes to the attention of Selfwealth that any email dispatched to Email Shareholders has returned an undeliverable or undelivered receipt for an Email Shareholder's nominated email address, Selfwealth is to dispatch to that Email Shareholder, within a reasonable time thereafter, the hard copy letter contemplated in the procedure for Non-Electing Shareholders. As I observed in Re Rex Minerals Limited [2024] FCA 1051 (at [79]), given the significance of the transaction to shareholders and the protective role performed by the Court in exercising powers under s 411 of the Act, it is desirable for the Court to make such an order to ensure that as many members as possible are notified of the Scheme Meeting and can exercise their right to vote in respect of the Scheme.
Order for postponement
Selfwealth also sought an order giving it power to postpone the Scheme Meeting to such time, date and place as it considers appropriate.
Clauses 12.1(c) and 12.7(a) of Selfwealth’s Constitution permit the postponement of its general meetings.
During the hearing, I asked Counsel for Selfwealth whether such an order was necessary in the circumstances of the present Scheme. Counsel acknowledged that Selfwealth did not have any specific event in mind which might require the Scheme Meeting to be postponed, but pressed for inclusion of the order on the basis that: (a) the order gives Selfwealth flexibility in relation to the timing of the meeting in case any technical procedural issue arises (but that is not of such importance or materiality that would necessitate Selfwealth returning to court to seek supplementary disclosure orders); and (b) even without such an order, Selfwealth could rely upon the provisions of its Constitution to postpone the scheme meeting by reason of r 3.3(2) of the Rules, which provides that scheme meetings must be convened, held and conducted in accordance with the relevant company’s constitution.
As I observed in Crown Resorts (at [95]), if a scheme meeting were to be postponed for a lengthy period, a question may arise whether the information provided to the members in respect of the scheme remained current at the time of the postponed meeting. In such circumstances, it may be necessary for the company to return to court to explain the reasons for the postponement and to obtain any orders that might be required to update the information provided to members. However, where an event arises that requires only a relatively short postponement of a scheme meeting, and where there’s no risk to information becoming stale, it will likely be more efficient for the company to postpone the meeting without the expense of returning to court for further orders.
In circumstances where the right to postpone a general meeting is already provided for by Selfwealth’s Constitution, and where members’ interests are ultimately safeguarded by the fact that Selfwealth must return to court for a second hearing to approve the Scheme, I considered it appropriate to make an order permitting the postponement of the Scheme Meeting. The order sought by Selfwealth was amended to provide that Selfwealth shall have power to postpone the Scheme Meeting to such time, date and place as it considers appropriate in accordance with its Constitution. The inclusion of the phrase “in accordance with its Constitution” is to make clear that all safeguards in the Constitution with respect to the conduct of a postponed meeting will be applicable to the Scheme Meeting. If Selfwealth exercises the postponement power, it will need to be in a position to address the Court about such matters at the second court hearing.
Conclusion
In conclusion, I am satisfied that this is a suitable case for the exercise of the Court’s discretion to make orders convening a meeting of Scheme Shareholders to enable the Scheme to be considered.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan. Associate:
Dated: 20 March 2025
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