What are the steps required to implement a scheme of arrangement?

• There are several key steps when it comes to implementing a scheme of arrangement.
• The bidder and the target company will usually execute a Merger Implementation Agreement (MIA) setting out each party's rights and obligations.
• The scheme will then be publically announced including all of the key terms and conditions. These terms will include any amount to be paid by the bidder.
• The scheme documents will be prepared. This includes an explanatory statement or scheme booklet. Notice must be given to each security holder. Often an independent expert report is included at this stage. This report specifies whether the best interests of security holders are catered for in the proposed scheme.
• You could use our Fixed Fee Quote service to call for tenders from lawyers to help you draft the documents you need.
• The Australian Securities and Investments Commission (ASIC) must be given at least 14 days notice to review the scheme documents.
• If ASIC is satisfied then it will confirm this with the target company.
• You must then apply to the court to convene a meeting of all security holders to enable consideration and voting. The confirmation from ASIC may need to be produced at this court hearing to prove to the court that ASIC has had the opportunity to review the scheme and has no objections.
• A resolution from security holders must be obtained through each meeting. The resolution must be passed by a majority of security holders present and voting and must also represent 75% of the votes.
• A second application is then made to the court to approve the scheme. The court will consider whether the scheme is fair and reasonable. The scheme of arrangement generally won't be approved unless:
  • the court is satisfied that the scheme is not intended to avoid the provisions of the Corporations Act 2001 (Cth); or
  • a statement from ASIC is provided that confirms there are no objections.
• The scheme is then binding on all members and is ready for implementation.