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 need to hear further from counsel at the hearing scheduled for 21 June 2023.

Law

[10]   Section 236(1) of the Act provides this Court with jurisdiction to approve     a scheme of arrangement, subject to such terms and conditions as the Court thinks fit. Section 237(1) provides the Court with power to make additional orders giving effect to any arrangement approved under s 236(1).

[11]   Section 235 defines “arrangement” in a non-exhaustive fashion.  A transfer  of shares from existing shareholders to a new acquirer comes within the definition  of “arrangement”.1

[12]   To approve a scheme of arrangement under s 236 the Court must be satisfied that:2

(a)There has been compliance with the statutory provisions as to meetings, resolutions, the initial Court orders and similar procedural requirements.

(b)The arrangement has been fairly put to the classes concerned, and that if a circular or booklet has been sent out to those classes, it gives all the information reasonably necessary to enable the recipients to judge and vote upon the proposals.

1      Recent examples include Re Westland Co-operative Dairy Co Ltd [2019] NZHC 1683 and Re Trade Me Group Ltd [2019] NZHC 840.

2      Re CM Banks Ltd [1944] NZLR 248 (SC) at 253; and Re Milne and Choyce Ltd [1953] NZLR 724 (CA) at 754.

(c)The classes were fairly represented by those who attended the meeting, and the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the classes whom they purport to represent.

(d)The arrangement is such that an intelligent and honest person of business, a member of the classes concerned, and acting in respect of her or his interest, might reasonably approve it.

(e)The arrangement is fair and reasonable to all of the classes concerned.

[13]   Because Embark is listed on the NZX and the ASX, it is a “code company” in terms of the Act.3 The proposed arrangement will affect the voting rights of Embark.4 In these circumstances, s 236A provides that the Court may not approve the scheme of arrangement under s 236 unless:

(a)Embark’s shareholders approve the arrangement by a resolution approved by a majority of 75 per cent of the votes of shareholders (in each interest class) entitled to vote and voting on the question, and by a simple majority of those shareholders entitled to vote; and

(b)The Court is satisfied that the shareholders of the company will not be adversely affected by the use of s 236 rather than the takeovers code to effect the change of voting rights, or the applicant has filed a statement from the Takeovers Panel indicating the Panel has no objection to the order being made under s 236.5

Decision

[14]   I am satisfied, based on Mr Mah’s affidavit, that Embark has complied with the Act’s provisions and with the initial orders.

3      Companies Act 1993, s 2(1), incorporating the definition of “code company” in s 2(1) of the Takeovers Act 1993.

4      See the definition of “affects the voting rights” in s 236A(5) of the Companies Act 1993.

5      Section 236A(3) makes clear that, even if the Panel provides such a statement, the Court need not approve the arrangement.

[15]   I am  also  satisfied that  the resolution  was fairly  put  to  the shareholders.  A scheme  booklet  was  distributed  to  shareholders  in  advance  of  the  meeting, in accordance with the initial orders. I approved a draft of that booklet when making the initial orders (subject to some minor changes). The booklet, as distributed, provided ample information to enable shareholders to consider and vote on the proposal. That information was comprehensively yet succinctly set out. Mr Mah’s affidavit satisfies me that the few questions from shareholders in advance of or at the shareholders’ meeting were answered clearly and appropriately.

[16]   There was only one class of shareholders. That class was fairly represented  at the meeting. There was a high turnout. Only a tiny minority voted against the resolution. There is no suggestion of coercion. None of the minority has taken steps to oppose the scheme. The overwhelming support and lack of opposition indicate fair representation and good faith by the majority.6

[17]   The arrangement is one that an intelligent and honest person of business, acting in respect of her or his interest, might reasonably approve. Mr Scott explained, in his affidavit, the reasons for the arrangement. Those reasons made sense to me. They clearly also made sense to the shareholders who overwhelmingly approved the arrangement.

[18]   As to the additional requirements  in  s 236A that  arise from  Embark being  a code company, these have been satisfied. The resolution received support well above the requisite thresholds. Embark has received a statement from the Takeovers Panel, dated 14 June 2023, indicating the Panel has no objection to the Court approving the scheme under s 236.

[19]   For those reasons, I am satisfied that it is appropriate to exercise my discretion to approve the scheme of arrangement.

6      Re Methven Ltd [2019] NZHC 608 at [9(c)].

Result

[20]   I approve the scheme of arrangement described in the Scheme Plan that was part of the materials distributed to Embark shareholders for the meeting that was held on 6 June 2023 (and as attached to the exhibit to the affidavit of Mr Mah, at pages 116–124).

[21]   Embark is granted leave to apply to the Court for approval of any amendment, modification or supplement to the scheme.

Campbell J