Background
Toro Energy Limited, an ASX-listed uranium exploration company, sought to merge with Canadian uranium company IsoEnergy Ltd by way of a members’ scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth). At the first court hearing (Toro Energy Limited, in the matter of Toro Energy Limited [2026] FCA 643), the Federal Court ordered Toro to convene a meeting of its shareholders to vote on the proposed scheme. IsoEnergy, as the acquirer and sole “Excluded Shareholder,” did not participate as a voting member.
The Scheme Meeting was held on 9 June 2026. Of the 8,600 registered shareholders, 360 voted, representing 52.41% of shares on issue held by eligible shareholders. The resolution passed decisively: 92.89% of votes cast were in favour and 70.19% of participating shareholders by number voted in favour, satisfying both the majority-in-number and 75%-by-value thresholds in s 411(4)(a)(ii). An independent expert had concluded the scheme was fair, reasonable, and in the best interests of Toro shareholders in the absence of a superior proposal, and the independent directors unanimously recommended it.
Toro then applied to Vandongen J at the second court hearing on 15 June 2026 for orders under s 411(4)(b) approving the scheme. ASIC provided a letter of no-objection under s 411(17)(b) on the same date. No shareholder or other party appeared to oppose the application. Toro also sought the court’s notations to support exemptions from registration requirements under s 3(a)(10) of the United States Securities Act of 1933 and from prospectus requirements under s 2.11 of the Canadian National Instrument 45-106 – Prospectus Exemptions.
The Court’s Holding
Vandongen J approved the scheme, making orders under s 411(4)(b) and exempting Toro from compliance with s 411(11) under s 411(12). His Honour was satisfied that all formal statutory requirements had been met: the Scheme Booklet had been registered with ASIC and dispatched in accordance with the first court orders, the meeting had been properly conducted, the requisite majority thresholds were achieved, all conditions precedent had been satisfied or waived (as evidenced by a certificate signed by an IsoEnergy director), and ASIC raised no objection. The court also found full and fair disclosure to shareholders, no evidence of bad faith or oppression of any minority, and no superior proposal having emerged.
On the low voter turnout — only 4.19% of shareholders by number attended or voted — Vandongen J noted that this does not preclude approval of a scheme, and observed that the participation rate by shares (52.41%) was materially higher than at Toro’s prior annual general meetings. His Honour accepted that there was no evidence the low turnout reflected any failure in the dispatch process or any improper deterrence of shareholders.
Vandongen J also addressed three matters raised by Toro’s counsel without a contradictor. He was satisfied that telephone shareholder communications were consistent with the Scheme Booklet and did not compromise the integrity of disclosure or voting. He declined to formally amend the scheme to identify IsoEnergy as the excluded shareholder, as its exclusion was already clearly stated in the Scheme Booklet. Finally, he made standard notations in the orders to support the US and Canadian securities law exemptions, following the approach endorsed in Allkem Limited, in the matter of Allkem Limited (No 2) [2023] FCA 1657, while reiterating that it is not for the Court to opine on whether its procedures satisfy the requirements of foreign exemption regimes.
Key Takeaways
- Low shareholder turnout at a scheme meeting does not, by itself, preclude court approval under s 411(4)(b), provided the statutory majority thresholds are met and there is no evidence of process failure.
- An independent expert’s conclusion that a scheme is fair, reasonable, and in shareholders’ best interests — combined with unanimous independent director recommendation and no superior proposal — strongly supports the court’s exercise of discretion in favour of approval.
- The court’s approval of a scheme, combined with appropriate notations in the orders, can ground exemptions from US Securities Act registration requirements (s 3(a)(10)) and Canadian prospectus requirements (NI 45-106, s 2.11) — now a standard element of cross-border Australian M&A schemes.
- Where only one identified party is an excluded shareholder and that exclusion is clearly disclosed in the scheme booklet, the court may decline to formally amend the scheme at the second hearing to name the excluded party.
- ASIC’s s 411(17)(b) no-objection letter and the conditions precedent certificate from the acquirer are key evidentiary requirements at the second court hearing.
Why It Matters
This decision is a routine but instructive example of the Federal Court’s supervisory role at the second court hearing in a members’ scheme of arrangement. It confirms the settled Australian framework for scheme approval and reinforces that the court’s role is to guard against oppression and ensure minimum standards of fairness — not to second-guess the commercial judgment of a properly informed majority of shareholders backed by independent expert opinion.
For practitioners structuring cross-border deals involving Australian-listed targets, the case is a useful template for the procedural steps — including the ASIC lodgment sequence, shareholder communications management, conditions precedent certification, and the standard court notations — required to activate US and Canadian securities law exemptions concurrently with Federal Court scheme approval.