iSOFT Group Limited, in the matter of iSOFT Group Limited (No 3) [2011] FCA 1026

REASONS FOR JUDGMENT 1 On 9 June 2011, for reasons that I then gave (see iSOFT Group Limited, in the matter of iSOFT Group Limited [2011] FCA 680), I made orders under s 411 of the Corporations Act 2001 (Cth) (the Corporations Act) that iSOFT Group Limited (iSOFT) convene two meetings of different classes of members, and a meeting of option holders, for the purposes of considering schemes of arrangement between iSOFT and its members, on the one hand, and between iSOFT and its option holders, on the other hand. Because of an error, it subsequently became necessary for a supplementary note to be sent to option holders. I made orders and gave reasons in relation to that matter on 7 July 2011 (see iSOFT Group Limited, in the matter of iSOFT Group Limited (No 2) [2011] FCA 882). I am satisfied that the proposed scheme booklet, in substantially the same form as the document that was marked as exhibit 1 at the earlier hearings, was registered with the Australian Securities and Investments Commission (the Commission) following the earlier orders. iSOFT has arranged for the scheme booklet to be dispatched to its members and option holders, in accordance with the Court's orders of 9 June 2011. 2 The meetings of members and option holders were held on 15 July 2011. At the first meeting of members, a question was raised concerning a matter that had been the subject of some debate at the earlier hearings. The representative of one of the members asked the chairman to explain the basis upon which the directors considered that the share scheme was in the best interests of iSOFT shareholders, in circumstances where convertible notes held by another member were to be repaid in full at their face value of $39.7 million, despite an independent expert's determination that the value of the convertible notes was between $18.3 million and $22.4 million. The chairman was invited to comment on the proposition that the holder of the convertible notes had made repayment in full a condition of its support of the share scheme. 3 The chairman of the meeting informed those present that the convertible notes were debt obligations of iSOFT, and that the arrangements relating to the repayment of the convertible notes had been the subject of discussion between iSOFT and the proposed acquirer. The chairman indicated that he understood there had been no discussions between iSOFT and the interests associated with the holder of the convertible notes as to the repayment of the notes. He indicated that the proposal received from the proposed acquirer was subject to a number of conditions, one of which was the repayment in full of the convertible notes. The acquirer had explained to the company that, as a United States public listed company, it was its policy only to make acquisitions where there would be no remaining minority shareholders, no outstanding convertible securities and no remaining debt. 4 The chairman further said that, because of the early repayment of the convertible notes, the holder of the notes may be receiving a benefit that was not available to all shareholders, and that the Court had determined that the best method for dealing with that matter was to place the interests associated with the holder of the notes into a separate class for the purpose of voting on the share scheme. He said that, given the financial position of iSOFT and the forthcoming maturity of senior debt obligations, the iSOFT board had an obligation to put to shareholders a proposal that was capable of being implemented. He said that that was the purpose of the meeting, and that no superior proposal had been received by iSOFT. There were otherwise no questions at the meeting in relation to the terms of the share scheme of arrangement. 5 The convertible note issue was referred to in the reasons that I gave on 9 June 2011, and resulted in a change to the proposed procedure for the submission of the schemes to members. In particular, as I have indicated, it resulted in the convening of two meetings of separate classes of iSOFT members. 6 The resolutions concerning the share scheme and option scheme were put to the various meetings of members and option holders. At the meeting of members other than the interests associated with the holders of convertible notes, 96.58 per cent of votes cast were cast in favour, and 92.69 per cent of shareholders present at the meeting voted in favour. At the separate meeting of note holder interests, all votes cast were cast in favour. At the meeting of option holders, all votes cast were cast in favour. At the members' meetings, 69.6 per cent of shares were represented, and approximately 21.63 per cent of shareholders were represented. At the option holders' meeting, 80.53 per cent of options by value were represented, and 54 per cent of option holders voted. Those votes were calculated after taking account of proxies, details of which were the subject of evidence before the Court today. Thus, it is clear that all three meetings approved the respective schemes by the majorities required by s 411 of the Corporations Act. 7 The meetings were advertised in accordance with the Corporations Rules. When the matter was called on for hearing this afternoon, the only appearances were for iSOFT and for the proposed acquirer. By letter of 18 July 2011, the Commission has stated that it has no objection to the schemes of arrangement, thereby satisfying s 411(17)(b) of the Corporations Act. The letter states that that indication has been given having regard to the Commission's criteria for providing such a statement in writing, as set out in its Regulatory Guide 60, Schemes of Arrangement. 8 The schemes are subject to certain conditions precedent, as set out in the scheme implementation agreement made between iSOFT and the proposed acquirer. I am satisfied that all of the conditions precedent, other than the making of an order by the Court, have been satisfied. Deeds poll have been entered into by the acquirer, and there is evidence of those deeds poll before the Court. There being no opposition to the making of orders under s 411 approving the schemes, I consider that it is appropriate to accede to iSOFT's application for such orders. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.