In the matter of Donaco International Limited (No 2)

Catchwords: CORPORATIONS — arrangements and reconstructions — schemes of arrangement or compromise — application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement and ancillary orders

Legislation Cited: - Corporations Act 2001 (Cth), s 411

Cases Cited: - Re Donaco International Ltd [2025] NSWSC 662
- Re Invocare Ltd (No 2) [2023] NSWSC 1350
- Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337
- Re Southern Cross Gold Ltd (No 2) [2025] NSWSC 2
- Re Tassal Group Ltd (No 2) [2022] NSWSC 1619

Category: Principal judgment

Parties: Donaco International Limited (Plaintiff)
On Nut Road Limited (Bidder)

Representation: Counsel:
J Hutton SC / B Ng (Plaintiff)
S Scott (Bidder)
Solicitors:
Ashurst (Plaintiff)
Hamilton Locke (Bidder)

File Number(s): 2025/226390

JUDGMENT

Nature of the application

1. By Originating Process filed on 13 June 2025, the Plaintiff, Donaco International Ltd (“Donaco”) applied for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) in respect of a proposed scheme of arrangement. By way of background, Donaco is a public company listed on the Australian Securities Exchange (“ASX”) which operates leisure and entertainment businesses across the Asia Pacific region, including the Star Vegas Resort and Club in Cambodia and the Aristo International Hotel in Vietnam. Under the proposed scheme of arrangement, Donaco and On Nut Road Ltd (“ONR”) have agreed that ONR will acquire all of the scheme shares for AUD$0.045 per scheme share in cash by way of a scheme of arrangement between Donaco and its shareholders (other than excluded shareholders) under Pt 5.1 of the Act. The excluded shareholders are ONR and its related bodies corporate and any Donaco shareholder who holds any shares on their behalf.

2. I made the orders sought by Donaco to convene the scheme meeting at the conclusion of the hearing on 20 June 2025 for the reasons set out in my judgment in Re Donaco International Ltd [2025] NSWSC 662. The scheme was then approved by the requisite majorities of Donaco shareholders at the scheme meeting for the purposes of s 411(4)(a)(ii) of the Act.

3. At this second Court hearing, Donaco seeks orders approving the scheme. No Donaco shareholder or other person indicated an intention to appear at this hearing, or appeared, to oppose the approval of the scheme and I made the orders sought by Donaco at the conclusion of this hearing. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Hutton and Ms Ng, who appear for Donaco, in this judgment.

Affidavit evidence

4. Donaco reads the affidavit dated 6 August 2025 of Mr Joshua Walsh, which addresses the lodgement of the convening orders and a copy of the scheme booklet with the Australian Securities & Investment Commission (“ASIC”) and registration of the scheme booklet with ASIC; proves the final scheme booklet as dispatched to Donaco shareholders; and indicates that, as at the date of his affidavit, Mr Walsh is not otherwise aware of anyone proposing to oppose approval of the scheme. By his affidavit also dated 6 August 2025, Mr Andrew Phillips addressed announcements made to ASX regarding the first Court hearing, registration of the scheme booklet and notice of the second Court hearing; the distribution of the scheme booklet; shareholder communications undertaken by Donaco; the conduct of the scheme meeting and the position as to Excluded Shareholders; and the tender of conditions precedent certificates, an executed letter deed to amend the scheme, including the definition of "Excluded Shareholder", and a letter from ASIC confirming that it has no objection to the scheme, satisfying s 411(17) of the Act.

Applicable principles, submissions and determination

5. The principles that apply to the role of the Court in approving a scheme of arrangement under s 411(4)(b) of the Act are well established. I summarised those principles in Re Invocare Ltd (No 2) [2023] NSWSC 1350 at [8]–[9] and, in Re Southern Cross Gold Ltd (No 2) [2025] NSWSC 2 at [8], I observed that:

“The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second Court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court’s discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 (“Central Pacific Minerals”) at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 … at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 (“Ellerston”) at [10]-[12]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [9]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [9]. The Court will also have regard to shareholders’ assessment of their interests as manifested in the voting results on the scheme resolution in recognising that shareholders are “the best judges of whether an arrangement is to their commercial advantage”: Central Pacific Minerals at [13]; Ellerston at [10].”

6. Mr Hutton submits that the scheme should be approved, and points to the lodgement of the scheme booklet and convening orders with ASIC; the despatch of the scheme materials to Donaco shareholders; the evidence as to the conduct of outbound calls to Donaco shareholders and inbound calls and emails, which did not raise any matters of concern; and the conduct of the scheme meeting. He points out that the statutory majorities were achieved at the scheme meeting and that the 750,935,543 total votes cast at that meeting (in person or by proxy) by 121 Donaco shareholders represents approximately 69.74% of all votes able to be cast and approximately 9.3% of the total number of Donaco shareholders eligible to vote (after excluding the Excluded Shareholder), which is higher than the voting participation rates in Donaco’s 2023 and 2024 annual general meetings. He also points out that Donaco gave notice of this hearing by an ASX announcement.

7. In summary, Mr Hutton submits:

“The procedural requirements have been satisfied.

The Independent Expert has concluded and as at the date of the second Court hearing continues to conclude, that the [s]cheme is fair and reasonable and in the best interests of Donaco [s]hareholders, in the absence of a superior proposal.

It is submitted that it would be an appropriate exercise of the Court’s discretion to approve the [s]cheme pursuant to subsection 411(4)(b) of the Act...”

8. I am satisfied that Donaco complied with the Court’s orders in respect of the distribution of scheme documents to its shareholders and, as I noted above, Donaco shareholders voted in favour of the scheme by the requisite statutory majorities. There was a higher voting participation rate at the scheme meeting than at Donaco’s recent annual general meetings and there is no reason to think there was any defect in the notice of the scheme given to Donaco shareholders. The other statutory requirements for the scheme have been satisfied. The scheme was recommended by Donaco’s directors and the independent expert whose report was included in the scheme booklet had expressed the view that the scheme was in the best interests of Donaco shareholders in the absence of a superior proposal. There is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Donaco shareholder, properly informed and acting alone, might approve it. There is otherwise no reason to doubt that Donaco has brought to the Court’s attention all matters that could be considered relevant to the exercise of the Court’s discretion or that there was full and fair disclosure to shareholders of all information material to the decision whether to vote for or against the scheme. I am therefore satisfied that the scheme is appropriate for the Court’s approval.

Amendment of the scheme under ss 411(6) and exemption from compliance with 411(11) of the Act

9. Donaco and ONR have entered into a letter deed which provides that Donaco and ONR consent and agree to an order under s 411(6) of the Act amending the Scheme by replacing the definition of “Excluded Shareholder” in cl 1.1 of the scheme with the definition “Excluded Shareholder means On Nut Road Limited of Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands" and contains an acknowledgement by ONR that it will not, and will procure that its Related Bodies Corporate do not, acquire any Donaco shares between the date of the letter deed and 12 August 2025, being the Record Date (as defined in the Scheme). Donaco seeks, and I will make, an order under s 411(6) of the Act amending the scheme to identify ONR as the Excluded Shareholder, consistent with the approach taken in the case law to identify excluded shareholders by name: Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]–[7]; Re Tassal Group Ltd (No 2) [2022] NSWSC 1619 at [12] (“Tassal”).

10. Mr Hutton also submits, and I accept, that there is no requirement for compliance with s 411(11) of the Act so as to have this Court order annexed to Donaco’s Constitution, where the scheme will not involve any modification of any rights of Donaco shareholders or of creditors or persons dealing with Donaco: Tassal at [14].

Orders

11. For these reasons, I made the orders sought by Donaco at the conclusion of the second Court hearing on 7 August 2025.

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