Background
Qoria Limited sought Federal Court approval under s 411(4)(b) of the Corporations Act 2001 (Cth) for a scheme of arrangement providing for acquisition of all its fully paid ordinary shares by US-incorporated Aura Consolidated Group, Inc. Under the scheme, Qoria shareholders would receive CHESS Depository Interests (CDIs)—interests in Aura common stock quoted on the Australian Securities Exchange—at a ratio of one CDI per 17.32 Qoria shares. Justice Jackson had previously ordered a shareholder meeting, which was held on 2 July 2026.
The scheme was approved by shareholders at the meeting with 91.49% of votes cast in favor (meeting the statutory threshold of 75% required under s 411(4)(a)(ii)(B)). The decision addressed procedural compliance issues, including minor irregularities in document dispatch and an error in Net Revenue Retention (NRR) figures disclosed in the scheme booklet, where blended NRR metrics were overstated by 3.2% to 18.5% depending on the quarter due to differing calculation methodologies between business segments.
The Court’s Holding
Justice Jackson approved the scheme under s 411(4)(b), finding no reason to exercise his supervisory discretion to refuse approval. The Court emphasized that while it is not a “mere rubber stamp,” approval is guided by established principles: whether the scheme is fair and reasonable, whether it was proposed in good faith for legitimate commercial purposes, whether minority shareholders face oppression or differential treatment, and whether disclosure to shareholders was adequate.
On the NRR disclosure error, the Court acknowledged reservations about the materiality characterization but found the error not so significant as to warrant refusal. The error resulted from human inadvertency, not integrity concerns. The individual D2C and EB NRR figures presented in the scheme booklet were accurate, and the blended figures appeared with appropriate disclaimers advising shareholders not to place undue reliance on such non-GAAP measures. The independent expert (Grant Thornton) confirmed the error did not change its opinion that the scheme was reasonable and in shareholders’ best interests. On low shareholder turnout (4.33% by headcount), the Court found it comparable to prior annual meetings and not indicative of deficient notice or discouragement to vote.
Key Takeaways
- A scheme of arrangement can be approved despite disclosure errors if the error is found immaterial, particularly where the independent expert’s valuation opinion is unaffected and non-GAAP metrics carry appropriate disclaimers.
- Minor procedural irregularities in dispatching scheme materials (omitted letters, invalid proxy forms) do not invalidate shareholder approval where they cause no substantial injustice and are covered by s 1322 relief.
- Low shareholder turnout in scheme voting, while noteworthy, does not preclude approval if it is shown to be consistent with historical voting patterns at shareholder meetings and not attributable to disclosure deficiencies.
- Court approval of a scheme of arrangement under the Corporations Act can serve as the basis for reliance on the s 3(a)(10) exemption under the US Securities Act of 1933, exempting cross-border securities issuances from US registration requirements.
Why It Matters
This decision confirms that Australian courts will approve cross-border acquisition schemes involving foreign acquirers and securities issued on the ASX, even where technical disclosure errors and low shareholder participation occur, provided the court is satisfied that good faith, fairness, and adequate disclosure have been substantially achieved. The judgment reinforces that non-GAAP financial metrics included in scheme materials must carry appropriate disclaimers, and that such metrics need not be corrected where underlying operational figures are accurate and an independent expert’s opinion is unaffected.
The decision also notes the established practice by which Federal Court approval of a scheme of arrangement triggers eligibility for s 3(a)(10) exemptions under US securities law, facilitating efficient cross-border M&A transactions without requiring registration. This framework is significant for Australian companies seeking acquisition by foreign bidders and issuing foreign securities as consideration, as it reduces regulatory burdens associated with US investor participation in such transactions.