Background
BOD Science Limited was an ASX-listed public company that developed medical cannabis drugs and hemp consumer products across Australia, the United Kingdom, the United States, and Europe. The company entered a trading halt in November 2023 and voluntary administrators were appointed by the directors under s 436A of the Corporations Act 2001 (Cth) on 29 November 2023. During the administration, the administrators traded the business and sold the company’s intellectual property assets, with sale proceeds earmarked for distribution to creditors.
A Deed of Company Arrangement (DOCA) dated 24 April 2024 was proposed by Biortica Agrimed Limited (the Proponent), under which Biortica would acquire all shares in BOD Science, contribute $380,000 into a deed fund (plus cash balances and a component of a research and development tax rebate), establish a creditors’ trust, and continue the employment of BOD Science’s staff. Creditors voted in favour of the DOCA. The completion deadline was 30 June 2026, but the DOCA had been varied multiple times to extend that date due to delays by the Proponent, who continued to fund ongoing trading costs in the interim.
Because some shareholders did not voluntarily consent to the transfer of their shares, the deed administrator, Andrew Barnden, applied to the Federal Court under s 444GA(1)(b) of the Act for leave to compulsorily transfer all issued shares — and, separately, all outstanding unlisted options — from existing holders to Biortica. ASIC had granted in-principle relief from the Chapter 6 takeover provisions, conditional on the court making the orders sought. No shareholder, creditor, or option holder appeared in opposition.
The Court’s Holding
Justice Jackman granted leave to the deed administrator to transfer all issued shares in BOD Science to Biortica under s 444GA(1)(b) of the Act. The Court was satisfied that the transfer occasioned no unfair prejudice to members within the meaning of s 444GA(3). An independent expert (Bradley Hellen) had valued BOD Science’s equity on a liquidation basis and found a net deficiency of approximately $5.32 million; even accounting for a potential voidable-transaction recovery of up to $1.674 million, the residual equity value remained nil. Shareholders would receive nothing under either the DOCA or a winding up, and the DOCA offered the incidental benefit of an earlier crystallisation of tax losses.
The Court also made orders under s 447A(1) of the Act extending the operation of s 444GA to cover the outstanding unlisted options (set to expire 30 November 2027), granting the deed administrator leave to transfer those options to Biortica as well. Relying on Beach J’s reasoning in Clubb (Deed Administrator), In the Matter of Toys ‘R’ Us ANZ Ltd [2025] FCA 1135, Jackman J held that s 447A was an available source of power to modify s 444GA to bring about the transfer of instruments convertible into shares alongside the shares themselves, and that option holders suffered no prejudice given the options’ nil economic value in both a DOCA and liquidation scenario.
Ancillary machinery orders were made under s 447A(1) and s 90-15(1) of the Insolvency Practice Schedule authorising the deed administrator to execute share transfer forms and register Biortica’s name in the share register in respect of both the shares and the options. Costs of the application were ordered to be costs in the deed administration.
Key Takeaways
- A deed administrator may obtain court leave under s 444GA(1)(b) to compulsorily transfer shares where shareholders suffer no unfair prejudice — established by showing that equity has nil value and shareholders would receive nothing in liquidation either.
- Section 444GA does not expressly cover options or other convertible instruments, but s 447A(1) can be used to modify Part 5.3A so that the leave regime extends to options, following the approach in Toys ‘R’ Us ANZ [2025] FCA 1135.
- Continuation of the business and retention of employees are relevant factors supporting the exercise of the court’s discretion to grant leave, as they advance the objects of Part 5.3A in s 435A(a).
- ASIC’s in-principle Chapter 6 relief, combined with the absence of any opposition from shareholders or option holders, strongly supported granting the orders.
Why It Matters
This decision reinforces the Federal Court’s willingness to facilitate DOCA restructurings where the alternative is liquidation and a worse outcome for all stakeholders. It confirms that courts will not treat the compulsory transfer of economically worthless shares as “unfair prejudice” to members, and it extends the Toys ‘R’ Us ANZ precedent on using s 447A to fill the gap in s 444GA with respect to options and other convertible securities.
For insolvency practitioners, the case provides a clear template for applications involving companies with unlisted options outstanding at the time of a DOCA — an increasingly common scenario in the life-sciences and cannabis sectors where options-based equity compensation is prevalent. The judgment also highlights the practical importance of engaging ASIC early and securing in-principle Chapter 6 relief before the court hearing, as ASIC’s co-operation was a material factor in the outcome.