Solarzero Limited
[2022] NZHC 3259
•6 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-001739
[2022] NZHC 3259
UNDER Part 15 of the Companies Act 1993 IN THE MATTER OF
an application for orders approving an arrangement under Part 15 of the Companies Act 1993
BETWEEN
SOLARZERO LIMITED
Plaintiff
Hearing: 28 November 2022 Appearances:
R Hollyman KC for the Plaintiff
Judgment:
6 December 2022
JUDGMENT OF HARVEY J
This judgment is delivered by me on 6 December 2022 at 2 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Counsel:
R J Hollyman KC, Shortland Chambers, Auckland
RE. SOLARZERO LTD [2022] NZHC 3259 [6 December 2022]
Introduction
[1] solarZero Limited (the Company) seeks orders under the Companies Act 1993 approving a scheme of arrangement which would result in GRP III NZ Bidco Limited (the Purchaser) acquiring all of the shares in the Company (the Scheme).
[2] Without notice orders dispensing with service and representation and directions for a meeting of shareholders and other related procedural directions were granted by Tahana J on 20 September 2022. The Company now seeks final unopposed orders approving the Scheme.
[3] The order granting the application was issued at my direction yesterday afternoon. This minute now sets out the reasons for that decision.
Background
[4] The Purchaser and the Company, including the latter’s shareholders and holders of convertible notes, seek approval for a scheme of arrangement under s 236 of the Companies Act 1993. As foreshadowed, initial orders were granted on 20 September last and the scheme has now been approved by the interested parties consistent with the Court’s earlier requirements. Mr Hollyman KC for the Company confirmed that there have been no objections.
[5] Counsel submitted that evidence has now been filed by Philippa Weston in a second affidavit affirmed 13 October 2022 which details compliance with the Court’s initial orders. Counsel pointed out that meetings of shareholders and noteholders were held on 12 October 2022. Resolutions approving the arrangement were passed, being approved by 100 per cent of the votes of the noteholders entitled to vote and 100 per cent of the votes of the shareholders entitled to do so. Mr Hollyman pointed out that since then, there have been no objections or appearances lodged by anyone.
[6] Counsel then referred to a summary of the Scheme set out in paragraphs 27 to 31 of his first memorandum and at paragraph 19of Ms Weston’s first affidavit. In short, the Scheme provides for the conversion of all convertible notes held by noteholders, pursuant to convertible notes agreements with the Company, to new
ordinary shares to be issued to the noteholders. Further, the Purchaser will pay $100 million for the Scheme shares in the Company, including those resulting from the conversion described previously and subject to commercially agreed deductions set out in paragraph 3.4 of the Scheme booklet provided. Finally, Mr Hollyman submitted that the evidence confirms that the Scheme provides for a payment to the Scheme participants.
Applicant’s submissions
[7] Counsel contended that the Scheme satisfies s 236 of the Companies Act 1993, citing Re Tilt Renewables Limited in support of the relevant principles and four-part test.1 First, the Court must be satisfied there has been compliance with relevant statutory provisions as well as the conduct of any special meeting and the opportunity for interested parties to be informed and take steps to oppose the proposal.
[8] Second, compliance also requires that the scheme has been fairly put, including information provided to shareholders that fully and fairly explains the proposal, its effect, the reasons for it and the reasons why independent directors recommend its endorsement. Third, representation at the meeting and whether those participating acted bona fide and without coercion is also a consideration.
[9] The fourth consideration is whether the arrangement might reasonably be approved by an intelligent and honest person of business assessing, inter alia, whether the proposal is fair and equitable.
[10] Mr Hollyman then sets out the steps taken to ensure compliance with these criteria. First, he confirmed that there had been compliance with the relevant statutory provisions. Secondly, counsel underscored that the proposal had been fairly put to shareholders and noteholders and substantially the same forms applied to the Court in support of the earlier application for the initial orders. Thirdly, regarding representation, Mr Hollyman submitted that this requirement was satisfied because of the high proportion of shareholders and noteholders who voted in support, either themselves or by proxy or by a corporate representative, and accounting for 98.36 per
1 Re. Tilt Renewables Limited [2020] NZHC 1398 at [6]–[7].
cent of the total number of shares currently on issue and 100 per cent of the value of the notes on issue. It was also important for the Court to consider, he contended, that no shareholder or noteholder filed a notice of opposition or signalled an intention to do so.
[11] Turning to the intelligent and honest business person test, counsel pointed to the fact that the Board considered that the Scheme is in the best interests of the company. It was, as foreshadowed, approved by 100 per cent of the votes cast by the shareholders and unanimously approved by the noteholders. Regarding third parties, counsel confirmed that the scheme does not prejudice any third party.
[12] As to simplicity, Mr Hollyman confirmed that the Company’s shareholders (as well as noteholders, who will convert their Notes for shares) will essentially be exchanging their shares for cash. There is one additional step which is the conversion
– creating a change in the existing shareholders ownership stake in the Company. In any event, counsel submitted that the conversion is not unusual or complicated and that the shareholders were made aware of the terms of the notes including the conversion which would occur when the convertible note agreements were triggered.
[13] On the question of price, Mr Hollyman confirmed that the purchase price exceeded all prior valuation work undertaken by the Company and its advisers. Accordingly, the Court can be satisfied that what is on offer is a fair price per share.
[14] In summary, the applicants seek orders under s 236(1) of the Companies Act 1993 endorsing the scheme between the Company, its shareholders, its noteholders and the Purchaser.
Legal framework and principles
[15]Section 236 of the Companies Act 1993 provides:
236 Approval of arrangements, amalgamations, and compromises
(1)Notwithstanding the provisions of this Act or the constitution of a company, the court may, on the application of a company or any shareholder or creditor of a company, order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify
and any such order may be made on such terms and conditions as the court thinks fit.
(2)Before making an order under subsection (1), the court may, on the application of the company or any shareholder or creditor or other person who appears to the court to be interested, or of its own motion, make any 1 or more of the following orders:
(a)an order that notice of the application, together with such information relating to it as the court thinks fit, be given in such form and in such manner and to such persons or classes of persons as the court may specify
(b)an order directing the holding of a meeting or meetings of shareholders or any class of shareholders or creditors or any class of creditors of a company to consider and, if thought fit, to approve, in such manner as the court may specify, the proposed arrangement or amalgamation or compromise and, for that purpose, may determine the shareholders or creditors that constitute a class of shareholders or creditors of a company:
(c)an order requiring that a report on the proposed arrangement or amalgamation or compromise be prepared for the court by a person specified by the court and, if the court thinks fit, be supplied to the shareholders or any class of shareholders or creditors or any class of creditors of a company or to any other person who appears to the court to be interested:
(d)an order as to the payment of the costs incurred in the preparation of any such report:
(e)an order specifying the persons who shall be entitled to appear and be heard on the application to approve the arrangement or amalgamation or compromise.
(2A) If the arrangement or amalgamation or compromise involves a transfer or amalgamation that requires the written approval of the Reserve Bank of New Zealand under section 44 of the Insurance (Prudential Supervision) Act 2010, the court may not make an order under this section unless that approval has been given.
(3) An order made under this section has effect on and from the date specified in the order.
(4) Within 10 working days of an order being made by the court, the board of the company must ensure that a copy of the order is delivered to the Registrar for registration.
(5) If the board of a company fails to comply with subsection (4), every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2).
[16] The Court of Appeal in Weatherstone v Waltus Property Investments Limited considered the scope of the Court’s discretion and concluded that it was broad and limited only by the policy and purposes of the Act.2 The Court of Appeal summarised the accepted “four-step test” in Re CM Banks Ltd (as similarly summarised in Re Tilt Renewables Limited) as:3
[32]The duty of the Court is to see:
(1)that there has been compliance with the statutory provisions as to meetings, resolutions, the application to the Court, and the like;
(2)that the scheme has been fairly put before the class or classes concerned; and that if a circular or circulars have been sent out, as is usual, whether before or after the making of the application to the Court, they give all the information reasonably necessary to enable the recipients to judge and vote upon the proposals;
(3)that the class was fairly represented by those who attended the meeting and that the statutory majority are acting bona fide and are not coercing the minority in order to promote interests adverse to those of the class whom they purport to represent; and
(4)that the scheme is such that an intelligent and honest man of business, a member of the class concerned and acting in respect of his interest, might reasonably approve.
[17] The Court of Appeal also confirmed that s 236 applies to reconstruction, amalgamation and compromises where the Court is given powers to buy in persons or classes other than the company. A scheme under s 236 may include arrangements for the acquisition of 100 per cent of a company’s shares by a third party: Re Fliway Group Limited.4
Discussion
[18] The evidence and submissions filed by the applicant are detailed and thorough enough to satisfy the Court that the proposed scheme should be approved, per s 236 of the Act because:
(a)There has been compliance with the statutory provisions;
2 Weatherstone v Waltus Property Investments Limited [2001] 2 NZLR 103 (CA) at [31].
3 At [32], citing Smith J in Re CM Banks Ltd [1944] NZLR 248 (SC).
4 Re Fliway Group Limited [2017] NZHC 3216 at [5]; see also Re Nuplex Industries [2016] NZHC 1677.
(b)The Scheme has been fairly put to the shareholders and noteholders;
(c)The shareholders and noteholders were fairly represented by those who attended the meetings; and
(d)The Scheme is such that it might reasonably be approved by an intelligent and honest person of business and is generally fair and equitable.
[19]The Scheme is approved accordingly.
Harvey J
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