Zenyth Therapeutics Ltd v Smith

In Zenyth Therapeutics Ltd v Smith, the respondent, Zenyth Therapeutics, a company in financial difficulty, sought to implement a scheme of arrangement to restructure its liabilities. The dispute involved an option scheme offered to the company’s employees and directors. The court was required to decide whether the scheme was fair and reasonable to the option holders, given that an independent expert had deemed the related option scheme reasonable despite it being less than the expert's valuation.

The primary legal issues centred on whether the company had provided misleading information or inadequate disclosure regarding the option holders' alternatives, and whether the independent expert's explanation of the scheme's reasonableness was deficient. The court examined whether the consideration offered under the scheme for certain series of options was less than the expert's valuation and whether this constituted a material irregularity.

The court found that the scheme was reasonable, despite the consideration for some series of options being less than the independent expert's valuation. The expert had considered the scheme as a whole and found it reasonable, which was supported by the court. The court held that the explanation provided by the independent expert was sufficient to satisfy the fairness test. The court also found that there was no misleading information or inadequate disclosure regarding the option holders' alternatives, as the expert had adequately considered all relevant factors. The court concluded that the scheme was fair and reasonable to the option holders, and approved the scheme.