Companies - Scheme of arrangement - Merger - Convening of scheme meeting - Role of court - Relevance of Ch 6 principles to discretion - Value of scheme consideration - Whether equality according to market price of scrip should be required

Corporations Act 2001, s 411(1)

Australian Securities and Investments Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 10 ACSR 230

Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd [1994] FCA 1212; (1994) 51 FCR 554

Re Advance Bank Australia Ltd (1997) 22 ACSR 513

Re Alpha Healthcare Limited (2001) 39 ACSR 238

Re Email Limited (2000) 18 ACLC 708

Re foundation Healthcare Ltd [2002] FCA 742; (2002) 42 ACSR 252

Re Hudson Conway Ltd [2000] VSC 21; (2000) 33 ACSR 657

Re Normandy Mining (No 4) (2002) 40 ACSR 474

Re NRMA [2000] NSWSC 408; (2000) 34 ACSR 261

Re Pheon Pty Ltd (1986) 47 SASR 427; 11 ACLR 142

Re Timor Sea Petroleum [2000] VSC 337; (2000) 35 ACSR 186

1 PARKER J: This is an application pursuant to s 411(1) of the Corporations Act 2001 for this Court to order a meeting of shareholders of Ranger Minerals Ltd ("Ranger") to consider a scheme of arrangement to restructure Ranger whereby Ranger will become the wholly owned subsidiary of Perilya Limited ACN 009 193 695 ("Perilya"). Ranger is a listed resource investment company incorporated in Western Australia. Perilya is a listed mining company incorporated in Western Australia and based in Perth although with diversified interests, a number of which are located interstate or overseas, including, by virtue of a recent acquisition, its major asset which is the Broken Hill mine in New South Wales.

2 Ranger has only one class of shares on issue and has not issued any convertible notes or granted any options. There were 64,487,464 ordinary fully paid shares on issue at the hearing date. Perilya has only one class of shares on issue. There were 117,723,784 ordinary fully paid shares on issue and 9,165,000 options on issue at the date of the hearing.

3 Under the scheme, it is proposed that all Ranger shares will be transferred to Perilya in consideration for which Perilya will issue to Ranger shareholders three Perilya shares for every four Ranger shares. If the scheme is implemented Ranger shareholders will also receive a fully franked cash dividend of 5.5 cents per share. If the scheme is successful, Ranger will be delisted from the official list of the ASX.

4 On 18 April 2002 Revesco Group Limited ("Revesco") announced an off-market takeover bid of shares in Ranger. The consideration offered comprised shares, options and warrants.

5 On 15 May 2002, by a Substantial Shareholder's Notice, Revesco announced acceptances under its offer for 7.56 per cent of Ranger. On 20 May 2002 Ranger issued a Target's Statement in response to the Bidder's Statement issued by Revesco, in which it was recommended that Ranger's shareholders reject the Revesco offer. An independent expert's report included in the Target's Statement concluded that the Revesco bid was neither fair nor reasonable to Ranger's shareholders.

6 At the time of the announcement of the Revesco bid Ranger and Revesco had a common Chairman. He resigned as Chairman of Ranger in April although he remained a director until 6 July 2002. He did not participate in relevant decisions. In these reasons when I refer to the "current directors" of Ranger the references are to the directors other than that Chairman. The evidence is that the current directors of Ranger held the view that the Revesco bid offered inadequate value to Ranger's shareholders.

7 During the week following 20 May 2002 there were discussions of the possibility of a merger between Ranger and Perilya. Perilya proposed a merger by way of a scheme of arrangement. On 27 May 2002 Perilya and Ranger agreed to this scheme as the preferred transaction structure. A Merger Implementation Agreement ("the Merger Agreement") was concluded that day. Detailed and extensive evidence has been placed before me disclosing apparently sound commercial reasons why each company agreed to the scheme and preferred a Ch 5 scheme to a Ch 6 takeover.

8 On 5 and 17 June 2002 Revesco increased its bid for Ranger. It is the undisputed evidence that at about the time of the second increase, ie some three weeks after the Merger Agreement, a director of Perilya and the Chairman of Revesco met and discussed the proposed merger and the Revesco takeover bid. At that meeting it was indicated that Perilya was open to discussion of the possibility of Revesco selling its shareholding in Ranger, either to Perilya or a third party. That was not taken any further at that time but, on or about 3 July 2002, a representative of Revesco approached the director of Perilya to discuss the possible acquisition by Perilya of Revesco's Ranger shares. Negotiations followed which culminated in a put and call option agreement between Revesco and Perilya dated 6 July 2002 over Ranger shares ("the Revesco Agreement"). This put and call option agreement was negotiated with the full knowledge and support of Ranger which became directly involved in the negotiations.

9 By the Revesco Agreement, Revesco granted a call option and Perilya a put option over Ranger shares owned by Revesco at an exercise price of $ 0.63 per share and, in addition, Perilya agreed to pay Revesco an amount of $1.5 million, described as a "resolution fee", by way of a reimbursement of Revesco's costs in relation to the Revesco bid and in consideration of Revesco agreeing not to extend its bid. In short, there was a commercial resolution of the hostile Revesco bid for Ranger.

10 Payment of the resolution fee was subject to a clawback as the total number of shares concerned was uncertain due to orders by the Takeovers Panel requiring the cancellation of certain acceptances under the Revesco bid. Sufficient cancelled acceptances were subsequently re-accepted to allow the full resolution fee to be paid to Revesco. This was done in two instalments on 8 and 22 July 2002. On 22 July 2002 Revesco announced that the takeover bid for Ranger had closed with Revesco receiving acceptances for 19.28 per cent of Ranger's issued capital. Perilya will not vote these shares should a shareholders' meeting be ordered. Revesco also agreed with Perilya that Revesco will not vote any shares it may hold which are the subject of the put and call option agreement.

11 I note that if the resolution fee is notionally included in the calculation of the price per Ranger share paid or agreed to be paid by Perilya to Revesco, the price is approximately $ 0.759.

12 ASIC has not produced to the Court a statement in writing that it has no objection to the proposed scheme; s 411(17). Hence, the Court must be satisfied that "the compromise or arrangement has not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6", before approving the scheme. It is for the proponents of the scheme to establish this.

13 Further, ASIC appeared before me to oppose Ranger's application. ASIC contends that the value of the scheme consideration is substantially below the consideration that Perilya agreed to pay Revesco for its Ranger shares pursuant to the Revesco Agreement, ie in ASIC's submission in truth approximately $ 0.759 per Ranger share. It is ASIC's submission that this consideration paid to Revesco is greater than the market value of the scheme consideration from the date of the announcement of the merger. Further, ASIC submits, even if the resolution fee is not taken into account, the consideration agreed with Revesco of $ 0.63 per Ranger share has been greater than the market value of the scheme consideration since approximately 12 July 2002.

14 In advancing its submissions, ASIC contends that in assessing the scheme the provisions of Ch 6 are of assistance; ie that the scheme may be viewed as analogous to a takeover by Perilya of Ranger. When so viewed, ASIC contends that the scheme offends the equality principle, s 602(c). In support of this ASIC relies on the minimum bid price principle, s 621(3) and the collateral benefits prohibition, s 623.

15 This approach leads ASIC to submit that an order for the convening of a meeting under s 411(1) should only be made if the value of the consideration offered under the scheme matches, as far as practicable, the consideration paid under the Revesco Agreement. In ASIC's submission, two ways by which this might be achieved are either for the scheme consideration to be determined according to the averaged market price for a number of trading days up to the date of this hearing, or the date when the explanatory statement is despatched, or, by the use of a formula based on the trading price of Perilya shares for any reasonable period from the date of the court hearing to the date on which the consideration is given to Ranger shareholders.

16 In response to the case of ASIC, it is submitted by Ranger, and by Perilya which intervened by leave, that there is no direct application of Ch 6 requirements to a Part 5.1 scheme. Further, in material respects they contend it would be inappropriate, if not impossible, to directly apply Ch 6 requirements to the scheme. They submit that neither the statute, nor even any policy of ASIC, requires that consideration must, or should be, measured by reference to market value only. In any event it is their submission that the scheme consideration is not less than the consideration of the Revesco Agreement. They rely on an independent expert valuation of the scheme consideration which values it at between $ 0.80 and $1.26 per Ranger share, to support the submission that the consideration offered by the scheme is greater than that under the Revesco Agreement, even if the resolution fee is taken into account, ie $ 0.759.

17 A report from the independent expert KPMG Corporate Finance (Aust) Pty Ltd was sought by Ranger following the Merger Agreement. On the evidence this was before the Revesco Agreement was even in contemplation. In an initial report the independent expert also concluded that the scheme was in the best interests of the participants and that Perilya was "paying a healthy premium to acquire control of Ranger". It also concluded the terms offered by the scheme were superior to Revesco's revised bid. The position was reconsidered by the independent expert following the Revesco Agreement. It remained of the view that the scheme merger is in the best interests of Ranger shareholders.

18 ASIC has not sought to contradict this report. It confines its objection to its use for present purposes to the proposition that the assessment of the value of the scheme consideration should be confined to market prices, whereas the independent expert assessed value having regard to other factors as well as market prices.

19 Importantly, in the submission of Ranger and Perilya, the shareholders of Ranger will be provided with all relevant information which will enable them to assess whether the scheme consideration is fair and reasonable, including by comparison with the consideration paid to Revesco.

20 Should leave be granted to call a meeting of shareholders to consider the scheme proposal the approval of at least 75 per cent of Ranger's members to the scheme is required: s 411(4). In that event, Ranger must seek the approval of the Court to give effect to the scheme: s 411(6).

21 Strictly, the majority of the issues ventilated before me fall to be finally determined at the second "approval" hearing. Nevertheless, I proceed on the basis that at this first "convening" hearing, the Court will not ordinarily order the convening of a shareholders' meeting unless the scheme of arrangement is of such a nature and cast in such terms that, if it achieves the required majority at the shareholders' meeting, the Court would be likely to approve it at the second Court hearing, if it were then unopposed. In Re Stockbridge Ltd (1993) 11 ACLC 201 Murray J said at 210:

"In my opinion, the law in relation to the exercise of discretion is indeed clear. The court is not to set itself up to second guess members of the business community or to interfere unduly in what such persons may regard as a scheme reflecting sound commercial judgement. On the other hand, the court has a duty not to approve a scheme which would not be in accord with sound commercial practice upon a reasonable view of the matter.

And so it is the case that a sensible practice has in my opinion developed in relation to s 411, that the process of seeking approval of the scheme of which this section speaks, will not be put in motion by the court unless it concludes that ultimately, at least upon the basis of the material of which the court is then aware, it would be likely to approve the scheme, subject only to further arguments and new matters being brought forward when the court's approval is sought in the final stage of the process."

22 In Re Bond Corporation Holdings Ltd (1991) 5 ACSR 304 at 316 Owen J said:

"The practice has developed that the Court, on application for leave to convene meetings under subsection 411(1) 'subjects the proposal in general terms and the scheme documents in particular, to close scrutiny. If at this stage of the proceedings, the Court were to form a view that, for whatever reason, the scheme is unlikely to receive approval under subsection 411(6) even if it were to be supported by creditors, then the Court should not give leave to summon meetings."

See also FT Eastment & Sons Pty Ltd v Metal Roof Decking Suppliers Pty Ltd (1977) 3 ACLR 69 at 72.

23 While I am conscious that there are decisions which suggest that the role of the Court under s 411(1) is limited to ensuring adequate disclosure I prefer to proceed in the present application on the basis indicated by the authorities cited.

24 In Re NRMA [2000] NSWSC 82; (2000) 33 ACSR 595 at [41] Santow J said that the Court's task at the approval stage is to determine whether all conditions required by s 411 have been satisfied, whether the majority of members have acted in good faith and not in pursuit of some illegitimate purpose; and whether the proposal is "at least so far fair and reasonable, as that an intelligent and honest man, ... acting alone in respect of his interest as such member, might approve it".

25 As was observed by Lindley LJ in Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 395 at 409:

"If the creditors are acting on sufficient information and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the court can be."

While this was said in the context of a creditor's scheme of arrangement it is equally applicable to a member's scheme.

26 The undisputed evidence before me is that in March 2002 Perilya committed itself to the acquisition of the Broken Hill mine which involved an outlay of some $60 million. At the time of this acquisition it was foreseen by Perilya's directors that Perilya required additional capital in the order of $25 million. This it proposed to achieve by an issue of new shares. Discussions with stockbrokers to implement this were at an advanced stage when, in the week 20 - 27 May 2002, discussions were held with representatives of Ranger. These culminated in the Merger Agreement on 27 May 2002. Ranger had substantial cash and liquid assets in the order of $30 million. Were it to become a wholly owned subsidiary of Perilya those assets would be available to Perilya, thus eliminating the need to raise external capital, and could be used to develop the combined interests of the two companies.

27 From Perilya's viewpoint, without a 100 per cent merger, it would not have unrestricted access to Ranger's cash reserves. Hence, Perilya's view that the proposed merger should be undertaken by a scheme of arrangement rather than a takeover bid.

28 Because of the scheme for merger, Perilya postponed its planned capital raising and in fact proceeded with a reduced placement as an interim measure pending the outcome of the merger. On 17 July 2002 Perilya announced it had completed a placement of shares to raise $10.2 million. These decisions have been made in the expectation that it will be known with certainty whether or not the merger will be successful by virtue of the meeting of shareholders (should one be held) and the final approval of the Court. On the evidence, this certainty of timing was seen to be important by Perilya because, by postponing and reducing its planned capital raising, it has limited its options for raising the capital it requires in a timely and effective manner should the merger not proceed. Internal contemporaneous memoranda, minutes, etc offer further confirmation of the issues considered by the Perilya Board and their timing and significance.

29 The evidence before me from Ranger confirms the concerns of its current directors about the inadequacy of the Revesco bid and the significance attached by the Ranger Board to a number of other considerations which persuaded it to favour a merger with Perilya pursuant to the scheme. These included what were seen to be significant benefits that would flow for all shareholders following a full merger, especially the ability for the cash resources of Ranger to be readily used to develop the merged asset base. Further, on the independent advice obtained by Ranger there was certainty that full capital gains tax rollover relief would be available to Ranger's shareholders under a scheme, but uncertainty otherwise.

30 In these circumstances on the undisputed evidence presently before me, there were apparently sound reasons for each company to prefer a merger by a scheme of arrangement, rather than a takeover. Further, the present evidence only admits the conclusion that the Revesco Agreement was not in contemplation at the time of the merger agreement on 28 May 2002. Hence, it could not have been a purpose of the merger scheme to avoid any Ch 6 implications of the Revesco Agreement. There is nothing in the present evidence which suggests contrivance or an element which is unreal or unnecessary.

31 For the purposes of s 411(17)(a) it is necessary that the scheme has not been proposed for the purpose of enabling avoidance of any of the provisions of Ch 6. In this regard I have to consider purpose, rather than the effect, of the scheme and to do so as a matter of substance and fact: Re ACM Gold Limited [1992] FCA 89; (1992) 10 ACLC 573 at 584. There is no reason on the evidence presently before me to consider that s 411(17)(a) would preclude approval of the scheme should approval be sought pursuant to s 411(6).

32 As has been indicated, ASIC submits that as the Revesco Agreement represents a higher consideration than the scheme consideration, when assessed by current market price of Perilya shares, with the consequence that the equality principle is offended; s 602(c). It points in particular to s 621(3) and s 623. As has been indicated these are provisions which apply to takeovers pursuant to Ch 6, not to schemes of arrangement the subject of Ch 5.

33 Nevertheless, for the purposes of the exercise of discretion on this present application, and looking ahead to the exercise of discretion should approval of the scheme pursuant to s 411(6) be sought, there may be reason to consider the protections afforded to individual shareholders by Ch 6 and, where appropriate, to adopt analogous safeguards to those applicable to conventional takeovers, albeit with necessary adaptations: Re Archean Gold NL (1997) 23 ACSR 143 at 147 per Santow J.

34 In this way practical effect may be given to the views expressed by Kirby P (as he then was) in Catto v Ampol (1989) 15 ACLR 307 at 310, see also Rodgers AJA at 324, that the scheme and the takeover provisions should be interpreted and applied, so far as language and apparent purposes permit, in a way "which affords a harmonious, practical and mutually supportive operation to each". This was a capital reduction case in a statutory context where the equivalents of Chapters 5 and 6 were in separate legislative enactments.

35 This approach appears also to be reflected in the views of the majority of the High Court in Gambotto & Anor v WCP Limited & Anor [1995] HCA 12; (1995) 182 CLR 432. The Court rejected the proposition that an alteration to the articles of a company authorising the expropriation of shares is sufficiently justified by the circumstance that the expropriation would advance the interests of the company as an entity or those of the majority of the corporators. In the absence of exceptional circumstances, to do so would, in the view of the majority at 446:

"... be tantamount to permitting expropriation by the majority for the purpose of some personal gain and thus be made for an improper purpose. It would open the way to circumventing the protection which the Corporations Law gives to minorities who resist compromises, amalgamations and reconstructions, schemes of arrangement and takeover offers."

36 Nevertheless, there are material distinctions between a takeover and a scheme for merger. The legislative purposes and the policy considerations differ in a number of respects. It is not the position that the legislature has applied the Ch 6 provisions to schemes of arrangement, and no search to find a harmonious, practical and mutually supportive operation would appear to be justified if its consequence was, in effect, simply to apply Ch 6 in every case as though it were part of Ch 5, subject only to necessary adaptations. In my view, the extent to which principles and legislative policies reflected in Ch 6 may usefully have relevance to, and may properly be allowed to weigh in the exercise of discretion when, a scheme of arrangement is being considered will be very dependent upon the particular circumstances of the case. Quite obviously, schemes of arrangement vary considerably in many material respects.

37 In Catto v Ampol (supra) the holder of more than 75 per cent of the ordinary shares, Pioneer, had acquired on-market a majority of preference shares at $4. Under a selective scheme for capital reduction that followed, the consideration offered for the balance of the preference shares was $2.78. Preference shareholders appointed a board member. It was concluded that Pioneer had been prepared to pay $4 per share to gain control of the board appointment. It was found that $4 was significantly greater than the value otherwise of the preference shares. In the absence of any other extraneous explanation for the larger shortfall in the consideration offered under the scheme, it was accepted by the court that the circumstances clearly involved unfairness. In that particular context, regard to the equality principle and its more particular applications can readily be seen to be appropriate. The circumstances of that case, however are manifestly different from the present. As Rodgers AJA said at 358:

"... The whole spirit which animates the ... code ... is an attempt to ensure that those are who are in a minority get equality of treatment."

38 Nor is this a case, such as in Re Archean Gold, where there was a serious doubt whether the necessary money to implement a scheme would be forthcoming. Santow J was concerned that mere disclosure of the financing situation with its attendant risks, though essential, might not be enough. He therefore had regard to protections in Ch 6, cf s 631, in approving the scheme, being prepared where appropriate to adopt analogous safeguards with necessary adaptations to the particular situation.

39 This is not a case where oppression of a minority interest is an issue. Rather, the issue presently raised is whether the majority is being treated unfairly. The majority, if fully informed, and by means of the shareholder meeting, may be expected to be well able to watch out for its interests if it is the view of the majority that a minority is unfairly advantaged. Of course, different issues may come to be raised on a s 411(6) approval hearing should that be reached.

40 Accepting that in an appropriate case there may be reason, as a matter of discretion, to adopt and adapt Ch 6 principles or provisions to ensure equality and prevent unfairness, the critical issue raised by the arguments is rather confined. In the circumstances of this scheme, is there reason in the exercise of discretion to seek to ensure that the scheme consideration is fair and would not offend the equality principle of Ch 6, having regard only to the market price value of the consideration?

41 The advantages and disadvantages of valuing shares according to market price will clearly vary according to a number of factors. This is not a case where there has been so little trading as to make market price unreliable on that count alone, although there has not been substantial trading and market price has fluctuated. The prevailing trend of both Ranger and Perilya since the Merger Agreement has been negative. Nevertheless, there are circumstances which may make market price unreliable or inappropriate as a method of assessing the value of shares for a particular purpose or which may make other approaches to value preferable. Context clearly has its relevance. As was observed by McHugh J in Gambotto v WCP Ltd (supra) at 457 in the context of an oppression case:

"Payment of compensation which accords to the market value of the expropriated shares will go along way to preventing the expropriation from being classified as oppressive. The market price of shares on a security exchange is cogent evidence of value particularly when the shares have traded in a fairly narrow band over an extended period. But the market price or even a price above the market price is not decisive of the fair value of the shares for the purpose of an expropriation. A price sufficiently higher to prevent an expropriation being characterised as oppressive will need to take into account numerous factors. In Weinberger v UOP Inc (1983) 457A. 2d 701, the Supreme Court of Delaware said that a fair price included 'all relevant factors: assets, market value, earnings, future prospects, and any other elements that effect the intrinsic or inherent value of a company's stock'. Consideration of these factors may lead to the conclusion that the market price or a higher price is not the fair price of the shares."

"No doubt in the long term the share price of a company will reflect its fundamental earning capacity or value. But the histories of stock markets are overrun by examples of companies whose intrinsic value remained unnoticed by the market for long periods of time."

42 No provision of either Ch 5 or Ch 6 requires any particular approach to be taken to the valuing of the consideration of an offer, whether a takeover or a scheme although ASIC placed some reliance on s 636(1)(h)(ii). For the purposes of applying s 621(3) ASIC policy statement 163.25 provides that in valuing quoted securities the bidder should value the share consideration by adopting the volume weighted average market price of the securities in the ordinary course of trading during the two full trading days before the valuation time. That, of course, is any time of the bidder's choosing up to five days before the date of the takeover bid. In the present case ASIC contends that this approach should be applied, albeit with necessary adaptations as there is no date equivalent to the date of the takeover bid. The independent expert retained by Ranger, in dealing with the value of the scheme consideration, had regard to ASIC policy statement 75 concerning reports to shareholders for the purposes inter alia of s 411(13), and to ASIC practice note 43 concerning valuations prepared by experts. PS 75 is expressed to be complimentary to PN 43. PN 43.39 indicates it is appropriate for an expert to consider, amongst other methods of valuation, asset-based methodologies, the application of earnings multiples, discounted cash flow analysis, recent quoted prices of listed securities and the current market value of the company.

43 In a takeover context there are clear justifications for ASIC's policy preference. The nature of the takeover process also gives to the offer date a particular significance, and thereby to market values immediately before that date. In a takeover the offer is capable, of course, of being accepted on the date of the despatch of the offer.

44 A scheme of arrangement is quite different in form and elements. There is no offer date as a benchmark. Necessarily, the ultimate outcome ie whether or not the scheme will proceed, will be determined by court decision and lodgement of the order. The process involves two court applications, either or both of which may be opposed, and a vote of shareholders at which the support of at least 75 per cent of the shareholders is essential. The process is necessarily prolonged. It ensures that shareholders have full and frank disclosure of all relevant issues. In a case such as the present, where the concern is whether a past and concluded acquisition of a minority holding involved a more valuable consideration than is proposed by the scheme, the court can ensure that the facts relating to the acquisition are fully and frankly presented to the shareholders, and that the shareholders are assisted by independent expert opinion as to the value of the scheme consideration according to a variety of considerations including market price and how it compares with the consideration paid for the past acquisition.

45 The circumstances of, and reasons for, that past acquisition and the justification offered by the propounders of the scheme for the consideration then paid, can be assessed by shareholders, who should be in a sound position to assess for themselves whether they are disadvantaged by inequality of treatment.

46 It is to be remembered that this scheme is being considered in the context that the propounders have, at least for present purposes and on the present evidence, been able to satisfy me that the scheme is not propounded for the purpose of avoidance of any part of Ch 6 by any person. The market prices of the shares in both Perilya and Ranger have varied considerably over the period since the Merger Agreement was announced. The effect of the scheme, if implemented, will be to result in an entity with a merged financial and asset base and interests which significantly different from that of either of the present companies. In the particular circumstances of this case as presently known, it appears to me that the policy considerations which support ASIC's approach to the value of the consideration in takeovers can be regarded as not having a compelling relevance in the determination of the present application.

47 Of course, schemes of arrangement themselves will vary considerably in their nature, objectives and circumstances. Efforts to ensure equality and fairness by the importation of Ch 6 principles and the adaptation of its provisions, including the significance of the assessment of value by reference to market price, may be appropriate in other schemes. They may even prove relevant if different circumstances should emerge at an approval hearing in the present case.

48 Bearing in mind that the holding acquired by Perilya from Revesco is a minority holding and will not be voted at the shareholders' meeting in any event, the combination of circumstances in this case, which have been touched on in these reasons, leads me to the conclusion that at this stage of the statutory process the interests of the shareholders will be adequately protected, and best served, by allowing them to reach an informed decision about the adequacy and equality of the scheme consideration at a shareholders' meeting.

49 The explanatory statement is before me in draft form for approval. It has been amended following discussions between the propounders and ASIC. At the hearing I required the propounders and ASIC to settle specific amendments to the "Important Notices" at the commencement of the report to directly identify ASIC's concern and the reason for it and ASIC's present intention to object to the approval of the scheme should there be a s 411(6) hearing.

50 With this amendment, which is intended to ensure that the issue of unfairness is clearly drawn to the attention of shareholders, I am satisfied that the draft explanatory statement fully and fairly informs the shareholders of all relevant issues and meets the statutory requirements.

51 For these reasons I am prepared to order a meeting of the members of Ranger and to approve the explanatory statement, pursuant to s 411(1).