Background
Grant Thornton Australia Ltd (GTAL), an unlisted public company providing accounting and professional services, sought orders under s 411 of the Corporations Act 2001 (Cth) to convene a meeting of shareholders to consider a proposed scheme of arrangement. Under the scheme, Turbo Fast Track Buyer Pty Ltd would acquire GTAL shares. Most scheme shares were held by GTAL principals or their nominees; approximately 1% were held by Grant Thornton Consolidated Ltd.
Eligible shareholders would generally receive a mix of cash and interests in Turbo Parent Partnership LP, with the allocation varying under principles in the scheme implementation deed. GTAL did not obtain an independent expert report. ASIC noted concerns that differential outcomes within one shareholder class would ordinarily be significant, but recognised GTAL’s unusual setting: an unlisted professional-services firm whose sophisticated partner-shareholders were familiar with the remuneration-based allocation principles.
The Court’s Holding
Black J made the requested first-stage orders convening the scheme meeting and associated orders. The Court held that the statutory preconditions for exercising the s 411 discretion were met: GTAL was a Pt 5.1 body, the proposal was an arrangement, it was bona fide and properly proposed, ASIC had a reasonable opportunity to consider it, and there was no apparent reason the scheme could not later be approved if the required majorities were obtained.
The Court accepted that the absence of an independent expert report, differential cash and scrip allocations, and non-disclosure of each director’s individual allocation did not prevent the meeting being convened in this particular transaction. Those conclusions depended on the shareholders’ sophistication, the existing differentiated dividend arrangements, disclosure of the allocation principles and each shareholder’s own allocation, and the specialised partner-based context. The Court left issues including class treatment available for consideration at the second court hearing.
Key Takeaways
- A first court hearing tests whether a scheme is fit to be put to shareholders; it does not finally approve the transaction.
- Differential scheme consideration may be permissible where it follows disclosed common allocation principles and shareholders can assess their own outcomes.
- An independent expert report is not invariably necessary for a members’ scheme, particularly where sophisticated shareholders have adequate information.
Why It Matters
The decision illustrates the flexibility of s 411 schemes for closely held, partner-based professional businesses. Features that would likely be problematic in a listed-company transaction—such as varied consideration and limited disclosure of directors’ individual outcomes—may be assessed differently where the shareholder body is sophisticated and the commercial arrangements are already differentiated.
The ruling is not final approval of the acquisition. GTAL must still obtain the statutory voting majorities, after which the Court will consider whether to approve the scheme at the second hearing.