31. January 2011 15:39
This judgment is to be read in conjunction with the judgment in Straits Resources Limited, in the matter of Straits Resources Limited  FCA 1467. This was a first court hearing with respect to two schemes of arrangement under Part 5.1 of the Corporations Act. The second scheme, for the acquisition of the shares in Straits by a third company (PTT) in the event that the demerger occurs, is relevant to this judgment.
Three issues were raised and considered in this judgment:
- A number of employees held shares in Straits. They were not held to be a separate class of shareholders as they were to be valued under the scheme in exactly the same way as other shareholders: -.
- Deal protection provisions included an exclusivity period extending for a period of just under 8 months. The Court noted that these were framed such as to be subject to the overriding obligation not to breach directors’ fiduciary duties or otherwise be unlawful, referring to Santow J in Re Arthur Yates & Co Limited (2001) 36 ACSR 758 at , and the length of the period corresponded to comparable periods in other schemes: -). Likewise, the charging of a break fee was within the 1% guideline set out in Takeovers Panel Guidance Note 7 and evidence was before the Court that this was calculated as a result of “normal commercial negotiation” and that it was in the interests of shareholders (referring to Lindgren J in Re APN News Media Limited (2007) 62 ACSR 400 at ): . Similar observations were made with respect to the “no due diligence” and “no talk” provisions within the scheme proposal.
- The acquisition scheme is being considered by the ATO as to whether it is for the sole or dominant purpose of obtaining a tax benefit and adverse tax consequences for Straits may result. As a result Straits sought to have the meeting convened approximately two weeks after the ATO’s position is expected to be clarified to enable an announcement to be made to the ASX prior to shareholders voting on the scheme. This seemed to the Court to be appropriate, noting that the usual practice is to require ten days notice to shareholders. If the ATO’s position was not clarified in sufficient time, Straits could adjourn the meeting, make further disclosure to shareholders and a further application to the court might be required: -.
Relevant paragraphs of Ford
[7.427], [19.140], [22.130], [24.071], [24.130], [24.160], [27.063], [27.065], [27,760]