Dairy Farmers Milk Co-operative Ltd v Australian Co-operative Foods Ltd

Dairy Farmers Milk Co-operative Ltd v Australian Co-operative Foods Ltd - [2008] NSWCA 126 - NSWCA 2008 case summary — Zoe

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28 Resolution 2 was in the following terms: " Resolution No 2 (Special Resolution) To approve the amendments to the ACF Rules THAT the Rules of the Co-operative be amended as shown in Section 11.3 (entitled 'Changes to ACF Rules') of the Restructure Booklet accompanying the Notice of this Postal Ballot of Members. Note: The reasons for, and the effect of, passing this resolution as a special resolution are set out in Section 11.3 of the Restructure Booklet which accompanies this Notice. " 29 The relevant amendment to the rules involved the substitution of sub-rule 16(4). Prior to the restructure, that sub-rule had read: "(4)(a) The number of shares which may be held by or by and on behalf of any one member of the Co-operative shall not exceed a number having the nominal value of Two million dollars ($2,000,000.00); (b) For the purpose of sub-rule (4)(a), a person holds shares if that person has a relevant interest, as defined in the Act, in those shares; (c) No member of the Co-operative shall hold, or have a relevant interest in, shares the nominal value of which exceeds · a number having the nominal value of Two million dollars ($2,000,000.00), or · one-twentieth of the total nominal amount of the issued share capital of the Co-operative, whichever is the lesser." 30 The proposed amendment, passed by the members in the postal ballot, provided as follows: "(4)(a)(i) On the Implementation Date the number of shares which may be held by or by and on behalf of any one member of the Co-operative shall not exceed a number having the nominal value of Two hundred million dollars ($200,000,000); (ii) After the Implementation Date, the number of shares which may be held by or by and on behalf of any one member of the Co-operative shall not exceed a number having the nominal value of Fifty million dollars ($50,000,000); (b) For the purpose of sub-rule (4)(a), a person holds shares if that person has a relevant interest, as defined in the Act, in those shares; (c) No member of the Co-operative, apart from the Supply Co-operative, shall hold, or have a relevant interest in, shares the nominal value of which exceeds (i) a number having the nominal value of Two million dollars ($2,000,000) or (ii) one-twentieth of the total nominal amount of the issued share capital of the Co-operative, whichever is the lesser." 31 The new sub-rule 16(4) was item 9 in the proposed changes: the note to item 9 read as follows: "It is necessary for tax purposes to have a specific limit on the number of shares any member may hold or have held on the member's behalf. Because the Supply Co-operative after Step 1 of Stage 1 will hold all of the shares of Restructured ACF, the specific limit in new rule 16(4)(a) is a very high number on the Implementation Date and a lower figure thereafter. In addition to the overall limit required by the tax legislation, the rules contain a provision which restricts substantial shareholdings to the lesser of 5 per cent of the nominal value of the issued share capital or $2 million. As the Supply Co-operative will hold more than this limit it is necessary to amend the rule by excluding the Supply Co-operative from its operation." 32 The effect of this rule was to permit the Supply Co-operative, after the date of implementing the restructuring, to hold shares having a nominal value of $50,000,000. That is a limit which it has never exceeded, after the implementation date, and, as at 31 July 2007, it held shares having a nominal value of a little under $27.5 million.

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4.1 On the Implementation Date and in the following order: (a) ACF will issue 5 shares of $1.00 each in its capital to the Supply Co-operative (the First Shares) in consideration of a payment of $5.00 made by the Supply Co-operative to ACF; (b)(i) The Scheme Shares will be cancelled and, by virtue of the cancellation, capital to the extent of $1.00 per Scheme Share will be payable by ACF to the Existing Members in proportion to the number of Scheme Shares held by them; (b)(ii) Each Existing Member directs that the capital repayable by ACF to the Member in respect of such cancellation of Scheme Shares be applied to the issue to the Member (in accordance with 4.1(c) of shares of $1.00 each in the capital of the Supply Co-operative so that such shares are issued as fully paid; (c)(i) The Existing Members will subscribe for, and the Supply Co-operative will in compliance with the Deed Poll issue to the Existing Members an aggregate number of shares of $1.00 each in the capital of the Supply Co-operative equal to the number of Scheme Shares, on the footing that the shares so subscribed for shall be issued by the Supply Co-operative to the Existing Members in proportion to the numbers of Scheme Shares held by them and in consideration of the payment of subscription moneys of $1.00 per share; (c)(ii) The Supply Co-operative will in compliance with the Deed Poll direct that the subscription moneys payable to the Supply Co-operative by each Existing Member in respect of such issue of shares be applied to the issue to the Supply Co-operative (in accordance with 4.1(d)) shares of $1.00 each in the capital of ACF so that such shares are issued as fully paid; (d)(i) The Supply Co-operative will in compliance with the Deed Poll subscribe for, and ACF will issue to the Supply Co-operative, an aggregate number of shares of $1.00 each in the capital of ACF equal to the number of Scheme Shares, in consideration of the payment by the Supply Co-operative of subscription moneys of $1.00 per share; (d)(ii) T he aggregate of the capital payable by ACF to the Existing Members (in accordance with 4.1(b)) shall be applied by ACF (in accordance with the directions described in this clause) in fully paying up the shares so issued.

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Part Cancellation of Shares by ACF and Issue of Shares by ACF to Existing Members 4.2 Following the implementation of clause 4.1, on the Implementation Date and in the following order: (a)(i) 80 per cent of the shares in the capital of ACF held by the Supply Co-operative (including the First Shares) will be cancelled and, by virtue of the cancellation, capital to the extent of $1.00 for each share so cancelled will be payable by ACF to the Supply Co-operative. (a)(ii) The Supply Co-operative will in compliance with the Deed Poll direct that the capital repayable by ACF to the Supply Co-operative in respect of such cancellation of shares be applied to the repayment (in accordance with 4.2(b)) of capital by the Supply Co-operative to the Existing Members; (b)(i) The Supply Co-operative will in compliance with the Deed Poll cancel 80 per cent of the shares in the capital of the Supply Co-operative held by each Existing member, and will also cancel a further 4 shares being part of the initial holding of ten (10) shares allotted to any one of the formation members of the Supply Co-operative, and, by virtue of such cancellations, capital to the extent of $1.00 per share will be payable by the Supply Co-operative to the Existing Members in proportion to the number of shares in the capital of the Supply Co-operative so cancelled formerly held by them; (b)(ii) Each Existing Member directs that the capital repayable by the Supply Co-operative to the Member in respect of such cancellation of shares be applied to the issue (in accordance with 4.2(c)) of shares of $1.00 each in the capital of ACF so that such shares are issued as fully paid; (c)(i) The Existing Members will subscribe for, and ACF will issue to the Existing Members an aggregate number of shares of $1.00 each in the capital of ACF equal to the number of shares cancelled in accordance with 4.2(a), on the footing that the shares so subscribed for shall be issued by ACF to the Existing Members in proportion to the number of shares so cancelled formerly held by them and in consideration of the payment of subscription moneys of $1.00 per share; (c)(ii) The aggregate of the capital payable by ACF to the Supply Co-operative (in accordance with 4.2(a)) shall be applied by ACF ( in accordance with the directions described in this clause) in fully paying up the shares so issued." 64 In summary, the Scheme entailed the following steps:

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