Members’ schemes of arrangement under Part 5.1 of the Corporations Act can be used in some circumstances instead of takeover bids under Chapter 6 of the Corporations Act to achieve a change of corporate control.

One of the factors to consider in choosing a change of control by way of scheme of arrangement under Section 411 of the Corporations Act is that decisions (firstly the approval of the member explanatory statement and the order for convening of a member meeting and secondly, after the members have voted, approval of the scheme itself) are at the discretion of the court.

The Chief Justice of the Federal Court has issued Practice Note CORP 3 – Schemes of Arrangement which states that when making an order under subsection 411(1) of the Corporations Act 2001 the Court will require that the explanatory statement or a document accompanying the explanatory statement, prominently display a notice that the fact that the Court has ordered that a meeting be convened and has approved the explanatory statement required to accompany the notices of the meeting does not mean that the Court:

(a) has formed any view as to the merits of the proposed scheme or as to how members/creditors should vote (on this matter members/creditors must reach their own decision); or

(b) has prepared, or is responsible for the content of, the explanatory statement.

In Seven Network Ltd, in the matter of Seven Network Ltd (No. 2) [2010] FCA 355 Justice Jacobson set out the role of the Court in reviewing scheme documents and approving the convening of scheme meetings and helpfully identified the issues the Court needs to be satisfied about before making the initial orders.