Public M&A: Schemes of Arrangement (LAWS70316)

In the field of company takeovers, company mergers and other corporate reconstructions, schemes of arrangement continue to play  an ever-increasing role. In the takeover sphere, schemes are frequently used as an alternative to using the takeover provisions in Chapter 6 of the Corporations Act 2001 (Cth). In recent times, the majority of takeovers (known as change of control transactions) have been undertaken through a scheme, including almost all ‘mega deals’ (being transactions valued at greater than $1 billion).   This subject will address what a scheme of arrangement is and the role that schemes play in these fields of commercial activity, particularly in the area of takeovers. The role played by the court,  the Australian Securities and Investments Commission (ASIC)  and the Takeovers Panel, as well as practical considerations and guidance in connection with determining to pursue a transaction via a scheme, and obtaining shareholder and court approval for  a scheme, are among the topics that will be addressed in this subject. The lecturers are both experienced practitioners in this field of the law, one being a commercial law barrister at the Victorian Bar and the other an M&A partner at Herbert Smith Freehills.

Principal topics include:

• What a scheme of arrangement is and the role schemes play in the field of takeovers, company mergers and other corporate reconstructions
• Strategic considerations in relation to determining whether to pursue a change of control transaction via a scheme of arrangement
• The statutory framework applicable to schemes of arrangement
• The role of the court at each of the first court hearing (the ‘meeting hearing’) and the second court hearing (the ‘approval hearing’)
• The role of ASIC
• Applications made to the Takeovers Panel regarding schemes of arrangement and the approach adopted by the Takeovers Panel in this context
• Practical considerations and guidance – including potential pitfalls – in connection with the process of negotiating a scheme implementation agreement and in obtaining both shareholder and court approval
• Issues arising in connection with negotiating a scheme implementation agreement and in obtaining both shareholder and court approval.

Topics to be drawn from matters such as:

• • Negotiating a scheme implementation agreement (including the terms of the scheme and deed poll) – issues and practical considerations including the circumstances which call for the establishment of an independent board committee to consider a proposed scheme
  • The recent use of more complex scheme structures including concurrent but alternative schemes and schemes coupled with a takeover bid
  • The scheme booklet: Content and approval
  • Meetings of shareholders: How, what, when and why
  • Classification of schemes and classes of members
  • The role of the independent expert
  • Break fees and exclusivity provisions
  • Warranties and performance risk
  • Treatment of Overseas shareholders
  • Dealing with options and performance rights
  • The role of directors when considering schemes including fetters or restraints on the exercise of their statutory and fiduciary duties
  • The question of voting recommendations being made by directors who are to receive a benefit in connection with a scheme  
  • How to deal with circumstances that change during the period between the first and second court hearings, including increases in scheme consideration and supplementary disclosure
  • Chapter 6 avoidance, ASIC position and Section 411(17) of the Corporations Act 2001 (Cth)
  • Forum consideration and differing judicial approaches
  • Opposition at court hearings and the court’s ‘approval’ discretion
  • Shareholder activism
  • Shareholder communications external to the scheme booklet
  • Making or responding to an application made to the Takeovers Panel in connection with a scheme
  • Treatment of collateral benefits that may be provided to a shareholder as part of a scheme transaction
  • Current issues, recent developments and reform issues, including the issues raised for consideration in the April 2022 Treasury consultation paper on corporate control transactions in Australia
• This subject does not address schemes of arrangement in the insolvency context.