In In the matter of Nexus Energy Ltd (subject to a
deed of company arrangement)  NSWSC 1910, the deed
administrators of Nexus Energy Limited (subject to a Deed of
Company Arrangement) (Nexus) sought leave of the Court to transfer
all ordinary shares in Nexus to SGH Energy (No 2) Pty Ltd (SGH2).
SGH2 was the proponent of the Deed of Company Arrangement (DOCA)
and was also associated with the secured lender.
Nexus was a listed company and its wholly-owned subsidiaries
held significant interests in gas and resources. While Nexus was
placed into administration in June 2014, its subsidiaries were not
placed into administration and continued operating.
SGH2 proposed a restructure via a DOCA whereby the secured
lender was paid in full, noteholders would be paid 74 cents in the
dollar, employee entitlements and trade creditors would be paid in
full, Nexus would be recapitalised, operations would continue and
the shares in Nexus would be transferred to SGH2. The shareholders
of Nexus were to receive no consideration under the DOCA for their
The deed administrators sought leave under s 444GA of the
Corporations Act (Act) to compulsorily transfer
the shares to SGH2.
Section 444GA provides that "the Court may only give
leave...if it is satisfied that the transfer would not unfairly
prejudice the interests of members of the company".
Several shareholders of Nexus opposed the application.
Black J considered whether the transfer would result in unfair
prejudice to the shareholders by comparing whether the shareholders
would receive a better return if the proposed DOCA was
Ultimately, his Honour agreed with the deed administrators in
finding that it was inevitable that Nexus would be placed into
liquidation if the proposed DOCA was rejected. Based on expert
evidence his Honour found that the shares in Nexus had no residual
value in a liquidation of Nexus and such a liquidation would likely
have resulted in either the liquidation or receivership of the
His Honour also found that there was no prospect of the shares
obtaining value within a reasonable time, and there was no
suggestion that the shareholders could or would fund Nexus
including its capital requirements.
Accordingly, his Honour found that the proposed transfer did not
involve prejudice to the shareholder of Nexus. And even if there
was prejudice, it was not unfair prejudice, given the benefits that
the proposed DOCA would provide to other stakeholders independent
of the proponent, including: trade creditors, note holders,
employees and those that benefitted from the continued operations
Section 444GA of the Act can provide a useful tool to give
effect to a restructure where shares need to be transferred in
order to preserve value in the corporate entity and shareholders
refuse to provide their consent.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent NSW decision has implications for liquidators of trustee companies dealing with trust funds and priority debts.
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