Background
Planet Innovation Holdings Ltd, an unlisted public company providing product-development and manufacturing services, proposed a scheme under which Meiban Innovation (Melbourne) Pty Ltd would acquire all shares it did not already own for $1.60 per share. Meiban already held 19.9% of Planet Innovation, and the proposed consideration for the remaining shares totalled about $116.9 million.
The scheme was conditional on Planet Innovation’s four founders, who together with associated entities held 33.38% of the company, subscribing for $2 million each in shares of Meiban United, Meiban’s ultimate Singapore parent. That opportunity was not available to other shareholders. The transaction also involved employment arrangements for the founders and other key employees, historical reward payments, retention incentives, and arrangements for employee share-plan loans.
The Court’s Holding
Justice Beach ordered Planet Innovation to convene two separate virtual scheme meetings: one for general participating shareholders and one for the founder shareholders. The founders’ distinct opportunity to subscribe for $8 million in Meiban United shares meant they should vote as a separate class, despite all participating shareholders receiving the same $1.60 cash consideration under the scheme itself.
The Court held that the other employee-related arrangements did not require further separate classes. The historical rewards-pool payments were made before the scheme implementation deed and were not conditional on the scheme; the retention arrangements and future employment contracts likewise did not create sufficiently different rights for class purposes. The Court also found the scheme fit to be put to shareholders, including because shares would not transfer to Meiban unless consideration had been funded into a trust account and paid. It did not approve the scheme at this first hearing; a further hearing was set for 29 September 2026.
Key Takeaways
- A distinct rollover or acquirer-equity opportunity for major shareholders can require a separate scheme class, even where scheme cash consideration is identical.
- Employee incentives, option cancellations, and limited-recourse loan treatment do not automatically create separate voting classes.
- At the convening stage, conditional funding may be sufficient where the transaction structure protects shareholders from transferring shares without payment.
Why It Matters
The decision illustrates the Federal Court’s practical approach to class composition in Australian schemes of arrangement. Separate meetings are warranted where a shareholder group has a materially different commercial interest in the broader transaction, but the Court cautioned against unnecessarily fragmenting shareholders into multiple classes.
It also confirms that a scheme can proceed to shareholder consideration despite an independent expert finding the offer not fair but reasonable, provided the expert concludes the scheme is in shareholders’ best interests and the disclosure adequately explains that conclusion.