CORPORATIONS - arrangements and reconstructions - schemes of arrangement or compromise - approval of supplementary disclosure.
Legislation Cited: - Corporations Act 2001 (Cth) Pt 5.1
Source
Original judgment source is linked above.
Catchwords
CORPORATIONS - arrangements and reconstructions - schemes of arrangement or compromise - approval of supplementary disclosure.
Legislation Cited: - Corporations Act 2001 (Cth) Pt 5.1
Judgment (5 paragraphs)
[1]
Solicitors:
Allens (Plaintiff)
Herbert Smith Freehills (Interested Party)
File Number(s): 2019/343734
[2]
Background and affidavit evidence
On 15 November 2019, I made orders convening a scheme meeting for the purposes of considering a scheme between Prime Media Group Limited ("Prime") and its shareholders, for the reasons set out in my judgment delivered on 16 December 2019 ([2019] NSWSC 1805).
On 10 December 2019, Prime brought a further application seeking orders in respect of the despatch of supplementary information to shareholders, relating to Prime's proposal to pay a special dividend to its shareholders on specified terms. That application was supported by an affidavit dated 10 December 2019 of Mr John Palisi, who is the chief financial officer of Prime. Mr Palisi referred to negotiations between Prime and the potential acquirer of its shares, Seven West Media Ltd ("Seven"), by which Seven had agreed to Prime paying a special dividend to its shareholders on specified terms, conditional on the scheme becoming effective (as defined in the Scheme Implementation Deed), which was to be paid prior to implementation of the scheme. Mr Palisi noted that Seven had also agreed to defer payment of certain accrued fees due under a program supply agreement between Seven and Prime to allow Prime to pay the special dividend, until the earlier of 10 business days following termination of the Scheme Implementation Deed in accordance with its terms or the business day following implementation of the scheme. Mr Palisi also referred to Prime's announcement of its intention in respect of the special dividend to the Australian Securities Exchange ("ASX") on 9 December 2019. Mr Palisi also referred to the steps which had been taken to prepare for despatch of a supplementary disclosure document relating to these matters and to the due diligence and verification process adopted in respect of that disclosure.
Prime also relied on an affidavit dated 10 December 2019 of Mr Craig Edwards, who had prepared an expert's report in respect of the proposed scheme, and had also prepared a revised expert report having regard to Prime's proposal to pay the special dividend. That supplementary independent expert report maintained the conclusions previously reached in Mr Edward's earlier report, namely that the scheme was not fair but reasonable, for the reasons set out in that initial report and noted in my earlier judgment.
By a further affidavit dated 10 December 2019, Mr Chris Blane, a solicitor acting for Prime in respect of the scheme, referred to communications with the Australian Securities and Investments Commission ("ASIC") in respect of the proposed supplementary disclosure. Mr Blane also annexed several media reports referring to commercial developments in respect of the scheme. By a further affidavit dated 10 December 2019, Ms Kirsty Prinsloo, a solicitor acting for Prime in respect of the scheme, annexed a letter dated 10 December 2019 from ASIC indicating that it currently did not propose to appear to make submissions, or intervene to oppose the scheme, or the making of orders in connection with the proposed despatch of the supplementary disclosure document.
[3]
Submissions
Mr Jackman, who appears for Prime, recognises that, where the Court has ordered the convening of a scheme meeting and has approved an explanatory statement, its approval should be sought before additional explanatory material is despatched: Re Centro Retail Ltd [2011] NSWSC 1321 at [11]; Re Trust Company Limited [2013] NSWSC 1946 at [6] - [8]; Re Investa Listed Funds Management Ltd [2016] NSWSC 344 at [4]; Re Investa Listed Funds Management Ltd [2016] NSWSC 369 at [1]. Mr Jackman rightly pointed out that the distribution of supplementary material can be approved in accordance with the Court's jurisdiction conferred by s 1319 of the Corporations Act 2001 (Cth) to give ancillary or consequential directions in relation to a meeting that the Court has convened.
Mr Jackman also points to several matters relevant to whether the Court would make orders for the dissemination of supplementary materials in relation to a proposed scheme, including whether shareholders have been given sufficient information and time to consider and evaluate the supplementary information; that the key information is presented in an accessible and readable way; the supplementary scheme disclosure provides adequate disclosure of events that have led to the application and is not misleading or deceptive in any material sense; the supplementary disclosure is of such a quality as may assist informed decisionmaking as to the course members should take with respect to the meeting; the company has taken steps to verify the accuracy of the statements in the supplementary scheme material; the directors of the company have confirmed that based on the verification process they are satisfied that the information contained in the supplementary material is in all material respects correct; and any proposed modification to the scheme or some other development in the related transactions is permissible in the sense that the modification is lawful and for a proper purpose, fair, not unreasonable and not oppressive to a minority); ASIC has been notified and any indication of ASIC's position; and whether the amended terms are more favourable to members than the original terms reflected by the proposed scheme identified in the orders made at the first court hearing: Re Citect Corporation Ltd [2006] NSWSC 143; Re Centro Retail Ltd above at [12]; Re Trust Company Limited above; Re Investa Listed Funds Management Ltd [2016] NSWSC 369 at [10], [14]; Re Billabong International Limited (No 2) [2018] FCA 496; Re Tawana Resources NL (No 2) [2018] FCA 1724 at [18].
Mr Jackman rightly submits that the announcement of the special dividend would amount to a change in circumstances which should be brought to the attention of Prime shareholders prior to the scheme meeting, and the proposed orders would facilitate the communication of information relevant to shareholders' assessment of that special dividend. The supplementary disclosure document includes a letter from the Chairman of Prime; Prime's announcement of the special dividend to ASX; general information concerning the Australian tax implications of the scheme and the special dividend for shareholders; and the supplementary independent expert report to which I referred above. As Mr Jackman points out, that supplementary disclosure meets the several requirements set out in the case law to which I have referred above. That disclosure provides relevant information as to the proposed payment of the special dividend and related issues; an appropriate verification process has been undertaken and Prime's directors have confirmed that they are satisfied that the information contained in the supplementary disclosure document is in all material respects correct; as I will note below, the supplementary disclosure document will be provided to shareholders with sufficient time prior to the scheme meeting for the shareholders to understand the effect of the special dividend, which does not raise complex issues; notice of the disclosure has been given to ASIC which has not indicated any concern in respect of it; and the payment of the special dividend would arguably be to the benefit of Prime shareholders, in the form of a de facto increase in the scheme consideration.
Mr Jackman refers to the manner in which the supplementary disclosure would be despatched to shareholders and to the view expressed in ASIC Regulatory Guide 111 as to the time that should be allowed for shareholders to consider supplementary information in respect of a scheme. The Court will have regard to that view but, as Mr Jackman rightly points out, it will assess the sufficiency of the time for shareholders to consider any supplementary disclosure in light of the circumstances of the case before it, and courts have from time to time approved schemes in which later disclosure of supplementary information has been made: Re Seven Network Ltd (No 2) [2010] FCA 355 at [12]; Re Amcom Telecommunications Ltd (No 2) [2015] FCA 410 at [20]; Re Billabong International Limited (No 2) above. As I have noted above, the supplementary disclosure here deals with payment of a special dividend of a specified amount in connection with the scheme, and shareholders would readily assess its implications, particularly where it has been announced to ASX and there has been media coverage of the proposed scheme. I am satisfied that the proposed orders will provide Prime shareholders with adequate time to consider the information contained in the supplementary disclosure document before voting at the scheme meeting.
[4]
Orders
For these reasons, I made orders on 10 December 2019 approving the despatch of the supplementary disclosure in respect of the scheme.
[5]
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Decision last updated: 22 December 2019