NSWNSWSC

In the matter of SDI Limited

[2026] NSWSC 662

Supreme Court of NSW|2026-06-10|Before: Black J

View on NSW Caselaw

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2026-06-10

Before

Black J

Catchwords

CORPORATIONS – arrangements and reconstructions – schemes of arrangement or compromise – application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement – whether requirements to order scheme meeting are satisfied

Source

Original judgment source is linked above.

Catchwords

CORPORATIONS – arrangements and reconstructions – schemes of arrangement or compromise – application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement – whether requirements to order scheme meeting are satisfied

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: In the matter of SDI Limited [2026] NSWSC 662

Hearing dates: 18 May 2026

Date of orders: 18 May 2026

Decision date: 10 June 2026

Jurisdiction: Equity - Corporations List

Before: Black J

Decision: Order convening scheme meeting and associated orders made.

Catchwords: CORPORATIONS – arrangements and reconstructions – schemes of arrangement or compromise – application under s 411 of the Corporations Act 2001 (Cth) for orders convening meeting of members to consider and, if thought fit, to agree to proposed scheme of arrangement – whether requirements to order scheme meeting are satisfied

Legislation Cited: - Corporations Act 2001 (Cth), s 9, Ch 2L, ss 411, 1319 - Supreme Court (Corporations) Rules 1999 (NSW)

By Originating Process filed on 30 April 2026, the Plaintiff, SDI Limited (“SDI”) applies for orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) relating to a proposed scheme of arrangement and associated orders.
By way of background, SDI is an Australian public company which is listed on the Australian Securities Exchange (“ASX”) and manufactures specialist dental materials which are distributed in many countries. The proposed scheme of arrangement, if implemented, will result in the acquisition of all of SDI’s shares by InnoXvest Dental Pty Ltd (“Bidder Sub”). Bidder Sub is an Australian proprietary company which was incorporated for the purpose of acquiring SDI's shares under the scheme and is a direct wholly-owned subsidiary of InnoXvest Pty Ltd (“Midco”). Midco is an indirect wholly-owned subsidiary of Beijing Guoci Kebo Technology Co Ltd (“Beijing Guoci”), which is in turn a direct wholly-owned subsidiary of Shandong Sinocera Functional Material Co Ltd (“Sinocera”). Sinocera is a Chinese company which develops and produces functional ceramic materials used in several industries including healthcare, and Beijing Guoci is the holding company of the majority of Sinocera’s domestic and international dental businesses. Under the terms of the proposed scheme, Bidder Sub would acquire all of the shares in SDI for $1.40 cash per scheme share (as defined in the Scheme Implementation Deed dated 27 February 2026, “SID”) less any permitted dividends which SDI may declare and pay prior to the Implementation Date (as defined in the SID). The maximum scheme consideration payable to scheme shareholders is approximately $166,411,742. If the scheme is implemented, SDI would become a wholly owned subsidiary of Sinocera and would delist from ASX.
I made the orders sought by SDI at the conclusion of the hearing on 3 March 2026. These are my reasons for doing so. I have drawn on the helpful submissions of Ms Ng who appeared for SDI in this judgment.

SDI reads an affidavit dated 30 April 2026 of Ms Gowri Kangeson, who is a solicitor acting for it in respect of the scheme. That affidavit describes the proposed scheme, and annexes a copy of the SID and a company extract for SDI.
SDI also reads an affidavit dated 14 May 2026 of Mr John Slaviero, who is the Chief Operating Officer and an Executive Director of SDI. Mr Slaviero gives evidence as to the nature of SDI’s business and outlines the scheme and the SID. He also addresses the verification of the scheme booklet and the manner in which the proposed scheme meeting would be conducted. Mr Slaviero also addresses SDI’s directors’ interests and the benefits they will obtain in relation to the scheme; refers to their unanimous recommendation that SDI shareholders vote in favour of the scheme; outlines SDI’s proposed communications with shareholders; and refers to SDI’s intended publication of the notice of the second Court hearing on the ASX platform.
SDI also reads the affidavit dated 14 May 2026 of Ms Xi Yun Huo, who is the Chief Executive Officer of Sinocera. Ms Huo describes the verification of information concerning the Sinocera group in the scheme booklet, addresses the funding arrangements in relation to the scheme and annexes a Deed Poll executed by Beijing Guoci and Bidder Sub in favour of scheme shareholders.
SDI also reads a further affidavit dated 18 May 2026 of Mr Hastings, a solicitor acting for Beijing Guoci and Bidder Sub, which addresses Beijing Guoci’s asset position, a further deed poll given by Midco in favour of Bidder Sub and scheme shareholders in respect of scheme funding (which was tendered as Ex 3) and the financial position of China Merchants Bank Co Ltd, Shenzhen Branch, the Lender, to Midco, which was not a matter of the Court’s general knowledge. This additional evidence is important in respect of the questions of Bidder Subco’s funding arrangements and performance risk.
SDI also tendered a letter dated 15 May 2026 from the Australian Securities and Investments Commission (“ASIC”) which, in common form, reserved ASIC’s position as to s 411(17)(b) of the Act to the second Court hearing and indicated that it did not currently propose to appear to make submissions or intervene to oppose the scheme at the second Court hearing.

Ms Ng addressed the well-established principles as to the Court’s role at the first Court hearing in respect of a scheme in submissions. The Court will determine, in the exercise of its discretion, whether to approve the convening of a scheme meeting and the explanatory statement if it is satisfied of several matters, namely that the plaintiff is a Pt 5.1 body; the proposed scheme is an “arrangement” within the meaning of s 411 of the Act; the scheme is bona fide and properly proposed; ASIC has had a reasonable opportunity to examine the proposed scheme and explanatory statement, to make submissions and has had 14 days’ notice of the proposed hearing date of the first Court hearing; the procedural requirements under the Supreme Court (Corporations) Rules 1999 (NSW) (“Rules”) have been met; and there is no apparent reason why the scheme should not, in due course, receive the Court’s approval if the necessary majority of votes is achieved: Re Orion Telecommunications Limited [2007] FCA 1389 at [5]; Re Staging Connections Group Ltd [2015] FCA 1012 at [19]; Re Wridgways Australia Ltd [2010] FCA 1187 at [30]; Re Ellerston Global Investments Ltd [2020] NSWSC 879 (“Ellerston”) at [25]; Re Vocus Group Ltd [2021] NSWSC 630 at [12].
The Court will not ordinarily summon a scheme meeting unless the scheme is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it. The Court will consider whether the proposed scheme is fit for consideration at the proposed scheme meeting, in the sense that it is of such a nature and cast in such terms that, if it achieves the statutory majority at the meeting, the Court would be likely to approve it on the hearing of a petition which is unopposed; and members are to be properly informed as to the nature of the scheme before the scheme meeting: F T Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72, approved in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 504; [1993] HCA 15; Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 at [36] and [44], cited with apparent approval in Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34 at [58]; Re InvoCare Ltd [2023] NSWSC 1180 at [16]–[17].
These principles were summarised by Halley J in Re Absolute Equity Performance Fund Ltd [2022] FCA 933 at [18]–[22] as follows:

I am satisfied that each of the preconditions to the exercise of the Court’s discretion in s 411 of the Act is satisfied in this case. SDI is a company registered under the Act and a Pt 5.1 body. The proposed scheme is an “arrangement” within the scope of s 411 of the Act where it involves the acquisition of the shares in SDI in return for consideration being paid to its shareholders.
There is no reason to suggest that scheme is not bona fide or properly proposed. The directors of SDI have formed the view that the scheme is in the best interests of SDI’s shareholders and they have unanimously recommended that shareholders vote in favour of the scheme in the absence of a Superior Proposal (as defined in the SID) and subject to the independent expert concluding (and continuing to conclude) that the scheme is in SDI shareholders’ best interests. Subject to the same qualifications, each director of SDI who holds SDI shares intends to vote in favour of the scheme. The independent expert’s report prepared by RSM Corporate Australia Pty Ltd (“RSM**”**) has assessed the value of an SDI ordinary share on a control basis to be between $1.21 to $1.38, with a preferred value of $1.29, using a capitalisation of future maintainable earnings methodology. RSM has concluded that, where the scheme consideration of $1.40 is above its valuation range and its preferred value for SDI shares, the scheme is “fair” and “reasonable” and is therefore in the best interests of SDI’s shareholders, in the absence of a Superior Proposal.
ASIC has here had a reasonable opportunity to examine the proposed scheme and scheme booklet, to make submissions and has had the necessary notice of this hearing and, as I noted above, has indicated that it does not currently propose to appear to make submissions or intervene to oppose the scheme at this hearing. The procedural requirements under the Rules have been met, where I will dispense with the requirement for compliance with r 3.4 of the Rules to publish a notice of the second Court hearing in a national newspaper, where SDI will publish that notice on the ASX in accordance with current scheme practice.
Ms Ng also addresses several further matters. First, the chairman’s letter contained in the scheme booklet disclosed that SDI’s directors collectively hold or control approximately 47.29% of SDI’s shares as at the last practicable trading date prior to finalisation of the scheme booklet. In particular, Mr Cheetham and Currango Pastoral Company Pty Ltd (“Currango”), an entity controlled by Mr Cheetham, hold approximately 45.29% of SDI's shares. Mr Cheetham and Currango have confirmed their intention to vote all SDI shares held or controlled by them in favour of the scheme, in the absence of a Superior Proposal and subject to the independent expert concluding (and continuing to conclude) that the scheme is in the best interests of SDI’s shareholders, and that matter is disclosed in the scheme booklet. SDI has not provided any advantage, benefit, promise or inducement to Mr Cheetham or Currango to elicit that statement of intention or for them to vote in that manner. Ms Ng submits, and I accept, that a voting intention statement of this kind is not ordinarily class-creating: Re ERM Power Ltd [2019] NSWSC 1502 at [21]; Re Tawana Resources NL (No 3) [2018] FCA 1952 at [23]–[32]; Re Allkem Ltd [2023] FCA 1397 at [58]; Re The Reject Shop Ltd [2025] FCA 522 at [44]. I accept that this matter provides no reason not to convene the proposed scheme meeting.
Second, Ms Ng notes that SDI may declare and pay a cash dividend of up to $0.015 per SDI share to SDI’s shareholders at any time prior to the Implementation Date (as defined in the SID). If that permitted dividend is paid, the scheme consideration to be provided to each scheme shareholder will be reduced by the aggregate cash amount per SDI share of the permitted dividend, but will not be reduced by the value attributed to any franking credits attached to that dividend. Mr Slaviero’s evidence is that, at the date of his affidavit, SDI’s board does not intend to declare or pay the permitted dividend and that an update will be provided by way of an ASX announcement before the scheme meeting. Ms Ng submits, and I accept, that the permitted dividend, if paid, would not involve financial assistance for the purpose of s 260A of the Act: Re Citadel Group Ltd (2020) 148 ACSR 598; [2020] FCA 1580 at [47]–[53]; Re Uniti Group Ltd (2022) 160 ACSR 602; [2022] FCA 671 at [50]–[61]; Re Oz Minerals Ltd [2023] FCA 197 at [7], [18]. This matter also provides no reason not to convene the scheme meeting.
Third, Ms Ng addresses the funding of the scheme consideration, the entry into a Deed Poll and the question of performance risk. The Court will give particular attention to the availability of funding where, as here, the bidder in a scheme is a special purpose vehicle which does not have capacity to perform its obligations without financial support from a holding company: Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257; [2021] NSWSC 1385 at [31]–[32].
Ms Ng points out that Bidder Sub's funding arrangements for the scheme consideration are disclosed in section 6.6 of the scheme booklet. She recognises that the maximum consideration payable by Bidder Sub in connection with the scheme is estimated to be $166,411,742. She refers to an equity commitment letter given by Sinocera, under which Sinocera commits to cause Bidder Sub to receive, directly or indirectly, an aggregate equity contribution of $66,564,697, which is to be used by Bidder Sub to make cash payments in respect of the scheme consideration and $1,664,000, being the amount of a reverse reimbursement fee, which I address below. Ms Ng also points out that Midco has entered into a binding debt commitment letter with the Lender on 11 May 2026, under which the Lender has agreed to provide financing to Midco in an amount of approximately $123,357,300, which is to be made available to Beijing Guoci for, inter alia, funding payment of the scheme consideration by Bidder Sub. Ms Ng also points out that Beijing Guoci and Bidder Sub have executed a deed poll in favour of scheme shareholders, binding them to perform the actions attributed to them under the scheme, including in relation to the provision of the scheme consideration.
It seemed to me that these funding arrangements required reinforcement by the entry into the further deed poll by Midco, which allowed scheme shareholders to enforce Midco’s obligations in respect of the funding of Bidder Sub. That matter was addressed at the scheme hearing and by the tender of that Deed Poll and Mr Hastings’ evidence. I accept that, with that reinforcement, these arrangements, together with the payment of the scheme consideration to a trust account maintained by SDI, are sufficient to address performance risk: Ellerston at [29]; Re ELMO Software Pty Ltd [2023] NSWSC 12 at [27]–[28]. This matter also does not provide reason not to convene the scheme meeting.
Fourth, Ms Ng notes that SDI intends to pay a one-off transaction bonus of $350,000 to each of four several executives, including two executive directors, if the scheme is implemented. The development of a practice of paying such bonuses, payable to persons who are performing their duties to a scheme company, is not a positive development. I accept that the case law recognises that such payments, where disclosed in the scheme booklet, do not prevent directors from making a voting recommendation to the relevant shareholders and do not provide reason not to order the convening of a scheme meeting. I also recognise that it would likely not be in the interests of SDI shareholders for the Court to deprive them of the opportunity to vote on the scheme, albeit in a context that includes these arrangements, by reason of these arrangements.
Fifth, Ms Ng addresses exclusivity arrangements in respect of the scheme. The Court is concerned to ensure that any exclusivity period should be for no more than a reasonable period, capable of precise ascertainment; an exclusivity clause directed at dealing with an unsolicited alternative proposal should be subject to a fiduciary carve-out; and the provisions should be clearly disclosed in the explanatory statement sent to shareholders: Re Arthur Yates & Co Ltd (2001) 36 ACSR 758; [2001] NSWSC 40 at [9]; Re TPG Telecom Ltd [2020] NSWSC 772 at [22]; Re Isentia Group Ltd [2021] NSWSC 910 at [23]; Re Asaleo Care Ltd [2021] FCA 406 at [55]. Clause 10 of the SID imposes several restrictions and obligations on SDI and the SDI board in relation to negotiations with third parties, including “no shop” (cl 10.2(a)) and “no talk and no due diligence” (cll 10.3 and 10.4) restrictions; and a “notification of approaches” obligation (cl 10.6) and a “matching right” (cl 10.7). The “no talk and no due diligence” restriction is subject to the SDI directors’ fiduciary and statutory duties (cl 10.5). These exclusivity provisions are disclosed in the scheme booklet. I accept that exclusivity provisions in this form are now commonplace in schemes of arrangement and are not inconsistent with the Takeovers Panel’s guidance as to “deal protection”: Re Villa World Ltd (2019) 139 ACSR 550; [2019] NSWSC 1207 at [23]. Although the “no shop” restriction is not subject to a fiduciary carve-out, that approach has been accepted in the case law: Re DUET Finance Ltd [2017] NSWSC 415 at [24]; Re Bigair Group Ltd [2016] FCA 1296 at [21]; Re Aveo Group Limited and Aveo Funds Management Limited [2019] NSWSC 1348 at [44]. The “End Date” for the “Exclusivity Period” and the exclusivity provisions under the SID is 30 September 2026 or such other date as agreed in writing by the parties. I accept that this is a reasonable period, and this matter also gives rise to no reason not to convene the scheme meeting.
Sixth, Ms Ng addresses a proposed reimbursement fee and reverse reimbursement fee in respect of the scheme. These fees represent 1% of the equity value of SDI, consistent with the Takeovers Panel’s 1% guideline, and the triggers for payment of this break fee are conventional for a transaction of this nature. The break fee is not triggered solely by SDI shareholders failing to approve the scheme booklet and is not a disincentive to shareholders declining to approve the scheme: Re Adelaide Bank Ltd [2007] FCA 1582 at [31]; Re Bolnisi Gold NL (No 2) (2007) 65 ACSR 510 at 513; [2007] FCA 2078. This matter also gives rise to no reason not to convene the scheme meeting.
Seventh, Ms Ng addresses SDI’s proposed communications with SDI shareholders, which include providing information concerning the scheme on an investor website, limited to providing links for users to access or download a copy of the scheme booklet, the notice of scheme meeting and a proxy form; and the conduct of a shareholder information line in accordance with common practice. SDI draws these proposed communications with SDI shareholders to the Court’s attention and no orders are sought approving the form of the proposed communications.
These matters, separately and together, give rise to no reason not to convene the scheme meeting.

In the matter of SDI Limited [2026] NSWSC 662 | Case summary | Zoe

In the matter of SDI Limited

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

Judgment

Affidavit evidence

Applicable principles

Matters relevant to whether to convene the scheme meeting

Exercise of the Court’s discretion whether to convene the scheme meeting

Orders

Legislation Cited (2)

Cases Cited (36)