Embark Education Group Limited - [2023] NZHC 1541

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2023-404-846

[2023] NZHC 1541

IN THE MATTER OF a scheme of arrangement under part 15 of the Companies Act 1993

EMBARK EDUCATION GROUP LIMITED

Applicant

On the papers

Counsel:

K C Grant and M G Hay for the applicant

Judgment:

20 June 2023

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 20 June 2023 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

EMBARK EDUCATION GROUP LIMITED [2023] NZHC 1541 [20 JUNE 2023]

Introduction

[1] The applicant, Embark Education Group Ltd (Embark), seeks final orders under s 236 of the Companies Act 1993 (the Act) approving a scheme of arrangement. I made initial orders on 11 May 2023.

[2] The applicant has filed two affidavits in support. One is by Christopher Scott, the managing director of Embark, dated 2 May 2023. The other is by Edmund Mah, the chief financial officer of Embark, dated 15 June 2023. Mr Mah deposes as to Embark’s compliance with the initial orders.

[3] Counsel filed a memorandum in support dated 15 June 2023. That memorandum addresses compliance with the initial orders and supplements the earlier submissions, dated 2 May 2023.

[4] Embark is registered under the Act. It is listed on the NZX Main Board and on the ASX with a foreign exempt listing.

[5] Embark operates 24 early childhood centres in Australia. It previously owned over 100 early childhood centres in New Zealand. In September 2022, Embark sold its New Zealand operations. On a resolution to approve that sale, 99.87 per cent of the votes cast by shareholders were in favour.

[6] The proposed scheme seeks to redomicile Embark as an Australian company. The scheme involves a one-for-one share swap under which existing Embark shareholders will exchange their current shares for shares in a new Australian entity, Embark Early Education Ltd. The proposal reflects that Embark’s sole business is now in Australia and should reduce tax complexities.

[7] In accordance with the initial orders, a meeting of Embark’s shareholders was held on 6 June 2023. At that meeting, a resolution to approve the proposed scheme was put to the shareholders as a single class. That resolution was approved by 99.68 per cent of the votes of the shareholders entitled to vote and who voted. A total of
55.78 per cent of total voting rights were exercised in favour of the scheme.

[8] The initial orders required that any person who wished to oppose or be heard on the application file and serve a notice of opposition, or notice of appearance, five working days prior to the hearing date (that is, by 14 June 2023). No such notices have been filed.

[9] Given the relatively straightforward nature of the scheme, the almost unanimous support, and the lack of any opposition, I have decided the application can be determined on the papers, without 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.

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Details

AGLC: Embark Education Group Limited [2023] NZHC 1541
Case: [2023] NZHC 1541
Decision Date: 20 June 2023

CaseChat Overview and Summary

Embark Education Group Limited, an applicant, sought final orders approving a scheme of arrangement under section 236 of the Companies Act 1993. The scheme involves redomiciling the company as an Australian entity by swapping shares with existing shareholders for shares in a new Australian company. The court was required to decide whether the scheme met the statutory criteria for approval, including compliance with procedural requirements, fair representation, and fairness to all shareholders. Additionally, given that Embark is a code company, the court needed to ensure the scheme met the additional requirements set out in section 236A of the Act.

The court found that Embark had complied with the statutory provisions and initial court orders, and that the scheme was fairly presented to the shareholders. The meeting was well attended, and the resolution to approve the scheme was supported by a substantial majority of shareholders. There was no evidence of coercion or unfair representation. The court was also satisfied that the scheme was fair and reasonable and would be approved by an intelligent and honest person of business acting in their own interest. Furthermore, the scheme met the additional requirements for code companies, as it received support above the requisite thresholds and the Takeovers Panel had no objection.

The court approved the scheme of arrangement as described in the scheme plan distributed to Embark shareholders. The court granted Embark leave to apply for approval of any amendments, modifications, or supplements to the scheme.

Orders