‘The court is not a rubber stamp’: the message from the federal court in respect of second court hearings for schemes

By Timothy Rowe

The Australian federal court gave us a salutary reminder that its role in approving schemes at the second court hearing is not perfunctory when it declined to approve a scheme of arrangement in respect of PR Finance Group (PRF). This was so even though its shareholders approved the scheme resoundingly.

PRF did not include audited financial statements of PRF for the financial year ending 30 June 2012 in the scheme booklet. Rather, it included a note that such financial statements would be lodged with ASIC, and therefore made available to shareholders, not less than 10 days before the scheme meeting.

While we consider that there will be circumstances in which the inclusion of audited financial statements will not be necessary, in this instance PRF: represented to the court that the financial statements would be available; and was on notice from ASIC that it considered the inclusion of such information important to the extent that it would withhold its ‘no objection’ letter and would appear at the second court hearing (both of which it rarely does)…

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