Adjourning and Postponing Scheme Meetings

In brief

• The ‘issue of the day’ in schemes of arrangement is whether it is appropriate for the Court to make orders at the first court hearing to give target companies the power to adjourn or postpone a scheme meeting.
• We consider such orders are entirely appropriate and consistent with the stated objective of the Courts to make schemes of arrangement as simple and efficient as possible.
• We hope the Courts adopt a consistent and definitive pragmatic position in relation to this issue, such that it does not repeatedly and needlessly get ventilated at first court hearings.

Introduction 

The issue du jour in schemes of arrangement is whether it is appropriate for the Court to make orders at the first court hearing giving the target company power to adjourn or postpone a scheme meeting. In this article, we explain the need for the Courts to adopt a consistent and definitive pragmatic approach to such orders.

As is well known, a scheme of arrangement involves a three-stage process, comprising:

1. a first court hearing to seek orders directing the target company to convene the scheme meeting;
2. a shareholder meeting to vote on the scheme of arrangement; and
3. a final court hearing to seek approval of the scheme of arrangement.

Once a scheme meeting has been convened, it is possible that it will be necessary to adjourn or postpone the meeting, for example, as a result of the emergence of a competing bidder, material new information or delays in obtaining regulatory approvals.

Should the Court make orders granting power to adjourn or postpone a scheme meeting?

If a target company’s constitution already contains an adjournment or postponement power, this power can be used in the case of a shareholder meeting to consider and vote on a scheme of arrangement.¹ Despite this, for around 20 years, the Courts have been prepared to make orders granting adjournment and postponement powers at the first court hearing.² There may be a variety of reasons why a target wishes to include an additional adjournment or postponement power in the Court orders, including to pre-wire machinery provisions relating to the re-scheduled scheme meeting. We discuss this further below. 

Recent developments

The issue was considered in the Crown Resorts/Blackstone scheme (2022). Although Crown’s constitution contained an adjournment and postponement power, Crown still sought orders giving itself the power to adjourn or postpone the scheme meeting. O’Bryan J ultimately granted the orders while indicating a concern that, if the scheme meeting was postponed for a lengthy period, there is a risk that the information in the scheme booklet (including in the independent expert’s report) could become stale. However, his Honour sensibly concluded that, if a question arose as to the currency of such information, this could be addressed at the final court hearing.³

The issue arose again this year in the SelfWealth/Svava, Quickstep/ASDAM Operations and Dropsuite/NinjaOne schemes. Unfortunately, different approaches were taken by different judges.

In the SelfWealth/Svava scheme, the target sought, and O’Bryan J made, orders to the effect that the target had the power to adjourn or postpone the scheme meeting; although, before making the orders, O’Bryan J queried whether the orders were necessary.⁴ In the Quickstep/ASDAM Operations scheme, O’Callaghan J made similar orders without raising any such queries.⁵ In both cases, the orders were made despite the target’s constitutions containing adjournment and postponement powers.

By way of contrast, in the Dropsuite/NinjaOne scheme, Button J declined to make orders allowing the target to adjourn or postpone the scheme meeting. Her Honour’s stated grounds for this decision were two-fold:

• the orders proposed by the target made no provision for all of the necessary machinery associated with a meeting being convened pursuant to the Court’s orders, such as orders for updated notices to be sent to shareholders, revised proxy forms and communications with shareholders; and
• the target had not identified any specific matter that it anticipated would necessitate adjournment or postponement and the target had confirmed that the proposed orders were included simply for administrative convenience.⁶ 

Commentary

As the Courts have specified:

“The Court recognises that the process for approval of schemes of arrangement is intended to be as simple as possible and the Court is supportive of simplification so far as it is consistent with the Court’s statutory responsibilities and binding authority.”⁷ 

Although it can be relatively straightforward to approach the Court for subsequent orders after the first court hearing, such applications result in additional costs for both targets and bidders and pose logistical and timing challenges, for example, submissions and affidavits still need to be prepared, and Counsel briefed and lined up, as part of the application process. 

Nor should it matter to the Court whether a target’s constitution already contains an adjournment or postponement power. There may be a variety of reasons why a target wishes to include an additional adjournment or postponement power in the Court orders. Those reasons might include to provide a clearer or more streamlined power, to pre-wire machinery provisions relating to the re-scheduled scheme meeting or simply to remove any doubt as to the ability of the particular target to adjourn or postpone the scheme meeting. 

It should not be a pre-requisite for the target to be aware of any specific facts, matters or circumstances that may require an adjournment or postponement of the scheme meeting for the Court to give it the power the adjourn or postpone a scheme meeting. 

It is not unusual for new developments to arise at very short notice in proposed acquisitions of listed companies. If a target determines that it is appropriate to adjourn or postpone a scheme meeting, it should be able to achieve this result quickly and cost-effectively. 

Whilst it is always possible to pre-wire in the form of the adjournment or postponement orders any machinery provisions relating to the re-scheduled scheme meeting, to the extent those provisions are absent or deficient it is always possible to approach the Court to address any such issues after the adjournment or postponement has occurred.

Similarly, there should not be any concerns as to whether the information in the scheme booklet may become stale as a result of any adjournment or postponement of the scheme meeting. It is well established that, if any material new information arises at any time before the scheme meeting, that information must be provided to target shareholders. The failure to do so can cause the Court to call into question, at the final court hearing, the validity of the scheme vote. 

It is hoped that the Courts will adopt a consistent and definitive pragmatic position in relation to this issue du jour. In our view, it is not necessary for target companies to revisit this issue at every first court hearing, and requiring target companies to do so consumes the Court’s (and parties’) valuable time (in the same way that certain other well-established issues are, in our view, often unnecessarily ventilated at first court hearings, such as deemed warranty provisions, performance risk, or the fact that section 411(17) is a matter for the final court hearing, etc).