Principles Applicable Upon an Application to the Court for Approval of a Meeting to Consider a Corporate Scheme of Arrangement

In the Matter of Tamboran Resources Pty Ltd [2023] FCA 1331 (2 November 2023) Shariff J usefully summarised the principles applicable upon an application made to the Court to allow of consideration of a scheme of arrangement between a company, on the one hand, and the members and creditors of the company, on the other hand, pursuant to s 411 of the Corporations Act 2001 (Cth):

[14]  The principles applicable to the role of the Court in approving the holding of scheme meetings are well settled: see Capilano Honey Ltd, Re Capilano Honey Ltd [2018] FCA 1568; (2018) 131 ACSR 9 at [32] –[34] per Farrell J; Boart Longyear Ltd, Re Boart Longyear Ltd [2019] FCA 62; (2019) 134 ACSR 591 at [26] per Farrell J.

[15]  These principles have been outlined in a number of recent decisions of this Court: Dealt Holdings Ltd, Re Dealt Holdings Ltd [2022] FCA 1104 at [22] –[26] per Halley J; MOQ Ltd, Re MOQ Ltd [2022] FCA 1160 per Halley J; Blackmores Ltd, Re Blackmores Ltd [2023] FCA 624 per Jackman J; DDH1 Ltd, Re DDH1 Ltd [2023] FCA 982 per Colvin J; Newcrest Mining Ltd, Re Newcrest Mining Ltd [2023] FCA 1080 per Beach J; Essential Metals Ltd, Re Essential Metals Ltd [2023] FCA 1101 per Jackson J; Mithril Resources Ltd, Re Mithril Resources Ltd [2023] FCA 1177 per Derrington J.

[16]  These authorities establish that the Court must be satisfied of a number of preconditions to the exercise of its discretion. The preconditions include that:

(a) the proposed scheme must be an “arrangement”;

(b) the proposed scheme must be in respect of a Part 5.1 body and as between that body and its creditors or members;

(c) an application for an order pursuant to s 411(1) must be made to the Court in a summary way by the Part 5.1 body, or any creditor or member;

(d) 14 days’ notice of the Court hearing at which the order is sought, or such lesser period as ASIC or the Court permits, must be given to ASIC;

(e) the Court must be satisfied that ASIC has had a reasonable opportunity:

(i) to examine the terms of the proposed scheme to which the application relates and a draft explanatory statement relating to the proposed scheme; and

(ii) to make submissions to the Court in relation to the proposed scheme and the draft explanatory statement.

(f) the proposed scheme is bona fide and properly proposed;

(g) the requirements in ss 411(3) and 412 of the Act, and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), regarding the information that is to be sent to creditors or members about the scheme have been met, such that the explanatory statement relating to the proposed scheme will provide sufficient disclosure to creditors or members;

(h) all other procedural requirements have been met, including those in the Rules; and

(i) the proposed scheme is “fit for consideration” at the meeting, in the sense that there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of members’ or creditors’ votes is achieved.

[17]  In relation to the last of the above matters, the authorities state that it is not necessary for the Court to descend into the commercial merits of the proposed scheme and that the proposed arrangement is one that is fit for consideration by a meeting of members if it is likely to gain the Court’s approval if passed by the necessary majority: see Essential Metals Ltd, Re Essential Metals Ltd [2023] FCA 240 at [24] per Banks-Smith J.