Supreme Court New South Wales Medium Neutral Citation: In the matter of Bionomics Ltd (No 2) [2024] NSWSC 1666 Hearing dates: 16 December 2024 Date of orders: 16 December 2024 Decision date: 20 December 2024 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders made approving a scheme of arrangement. Catchwords: CORPORATIONS – Arrangements and reconstructions – Schemes of arrangement or compromise – Application under s 411 of the Corporations Act 2001 (Cth) for orders approving scheme of arrangement – Where formal requirements satisfied – Whether scheme of arrangement should be approved. Legislation Cited: - Corporations Act 2001 (Cth), s 411 - Securities Act 1933 (US), s 3 Cases Cited: - Re Amcor Ltd (No 2) [2019] FCA 842 - Re Atlas Iron Ltd (No 2) [2016] FCA 481 - Re Bionomics Ltd [2024] NSWSC 1440 - Re Central Pacific Minerals NL [2002] FCA 239 - Re Coca-Cola Amatil Ltd [2021] NSWSC 489 - Re Ellerston Global Investments Ltd [2020] NSWSC 1108 - Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 - Re InvoCare Ltd (No 2) [2023] NSWSC 1350 - Re Murchison Metals Ltd [2014] NSWSC 951 - Re Newcrest Mining Ltd (No 2) [2023] FCA 1251 - Re Pendal Group Ltd (No 3) [2023] NSWSC 14 - Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 - Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 - Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 - Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 - Re Simeon Wines Ltd (2002) 42 ACSR 454 - Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 - Re TASK Group Holdings Limited (No 3) [2024] NSWSC 854 - Re Telstra Corporation Ltd (2022) 163 ACSR 543 - Re Trust Company Ltd [2013] NSWSC 1947 Category: Principal judgment Parties: Bionomics Limited (Plaintiff) Representation: Counsel: I Ahmed SC (Plaintiff) Solicitors: Hamilton Locke (Plaintiff) File Number(s): 2024/385137 Judgment Background 1. By Originating Process filed on 17 October 2024, Bionomics Ltd ("Bionomics") applies under s 411 of the Corporations Act 2001 (Cth) ("Act") for orders relating to a proposed scheme of arrangement and associated orders. 2. The proposed scheme is a members' scheme under which a company incorporated in Delaware in the United States, Neuphoria Therapeutics Inc ("Neuphoria"), will acquire all of the ordinary fully paid shares in Bionomics. If the scheme is approved, Bionomics shareholders (other than Ineligible Overseas Shareholders and certain Small Parcel Holders) will be entitled to receive consideration in the form of shares in Neuphoria in the ratio of one Neuphoria share for every 2,160 Bionomics shares they hold. The excluded Small Parcel Holders that are affected in this way are those who have elected to have the Neuphoria shares to which they would be entitled sold in this way. American Depositary Shares ("ADSs") have also been issued in respect of Bionomics shares, and Neuphoria will issue one Neuphoria share to the ADS Depository for every 2,160 Bionomics shares that are held by Citicorp Nominees Pty Ltd as nominee within the ADS structure. 3. I made the orders sought by Bionomics on 8 November 2024 for the reasons set out in my judgment in Re Bionomics Ltd [2024] NSWSC 1440. The scheme meeting was held on 12 December 2024 and the scheme was then approved by the requisite majorities for the purposes of s 411(4)(a)(ii) of the Act. At this second Court hearing, Bionomics now seeks orders approving the scheme. No Bionomics shareholder or other person indicated an intention to appear at the second Court hearing on 16 December 2024 or appeared to oppose the approval of the scheme and I made the orders sought by Bionomics at the conclusion of the second Court hearing on that date. These are my reasons for making those orders, and I have drawn on the helpful submissions of Mr Ahmed, who appears for Bionomics, in this judgment. Affidavit and other evidence 1. Bionomics reads an affidavit of Mr Papapetropoulos sworn in the United States of America on 12 December 2024 (but on 13 December 2024 in Australian time). He is a director of Bionomics and gives evidence of communications with Bionomics shareholders, the conduct of the scheme meeting, the results of the scheme meeting, and voter turnout at that meeting. 2. Bionomics also reads an affidavit of Mr Sanderson affirmed on 13 December 2024 which addresses the lodgement of the Court's orders and scheme booklet with the Australian Securities & Investments Commission ("ASIC"), compliance with the Court's orders as to the dispatch of material to shareholders, and other communications with those shareholders. Bionomics also read an affidavit dated 16 December 2024 of its solicitor, Mr Farquhar, which addressed notice of the second Court hearing and the absence of any indication that any shareholders sought to appear, and the position as to conditions precedent in respect of the scheme. Bionomics also tenders a letter from ASIC confirming that it has no objection to the scheme for the purposes of s 411(17) of the Act. Applicable principles 1. The Court must be satisfied of several matters in order to approve a scheme of arrangement at the second Court hearing, namely that the plaintiff has complied with the orders of the Court convening the meeting of members; the meeting of members so convened has approved the scheme with the requisite majorities; all other statutory requirements have been satisfied; the scheme is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone, might approve it; the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; and there was full and fair disclosure to members of all information material to the decision whether to vote for or against the applicable scheme: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Central Pacific Minerals NL [2002] FCA 239 ("Central Pacific Minerals") at [8]-[14]; Re Seven Network (No 3) (2010) 267 ALR 583; [2010] FCA 400 ("Seven Network") at [35]-[39]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Redcape Property Fund Ltd and the Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Signature Capital Investments Ltd (No 2) [2016] FCA 385 at [4]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5]–[6]; Re Amcor Ltd (No 2) [2019] FCA 842 at [7]-[11]; Re Ellerston Global Investments Ltd [2020] NSWSC 1108 ("Ellerston") at [10]-[12]; Re Coca-Cola Amatil Ltd [2021] NSWSC 489 at [9]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [9]. The Court will also have regard to shareholders' assessment of their interests as manifested in the voting results on the scheme resolution in recognising that shareholders are "the best judges of whether an arrangement is to their commercial advantage": Central Pacific Minerals at [13]; Ellerston at [10]. 2. I also summarised the applicable principles in Re InvoCare Ltd (No 2) [2023] NSWSC 1350 at [8]-[9] as follows: "The matters of which the Court must be satisfied in approving the scheme at the second Court hearing are whether there was compliance with the orders of the Court convening the scheme meeting or meetings; whether the resolution to approve the scheme was passed by the requisite majority and whether other statutory requirements have been satisfied; and whether all conditions to which the scheme is subject (other than Court approval and lodgement of the Court's orders with ASIC) have been met or waived: Re ELMO Software Ltd (No 2) [2023] NSWSC 81 ("ELMO") at [7]. The Court also has, in exercising its power of approval, a residual discretion whether to approve a scheme and is not bound to approve it merely because it has made orders for the convening of meetings or because the statutory majorities have been achieved: Re Seven Network Ltd (No 3) (2010) 267 ALR 583 ("Seven Network") at [31]; Re Staging Connections Group Ltd (No 2) [2015] FCA 1102 at [12]. In exercising that residual discretion, the (non-exhaustive) matters the Court will take into account include whether the scheme is fair and reasonable so that an intelligent and honest member of the relevant class, properly informed and acting alone, might approve it; whether there was full and fair disclosure to members of all information material to the decision whether to vote for or against the scheme; and whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion: Re Permanent Trustee Co Ltd (2002) 43 ACSR 601 at [8]; Seven Network at [35]-[40]; Re Pendal Group Ltd (No 3) [2023] NSWSC 14 at [10]; ELMO at [8]." Submissions and determination 1. I am satisfied that Bionomics complied with the Court's orders in respect of the distribution of scheme documents to its shareholders. As I noted above, the scheme meeting was held on 12 December 2024 and Bionomics shareholders voted in favour of the scheme by the requisite statutory majorities. Some 95.87% of the votes cast were in favour of the proposed scheme (excluding shareholders who abstained); and 86.67% of shareholders who cast votes were in favour of the proposed scheme (again excluding shareholders who abstained). Mr Ahmed points out that, in calculating the number of shareholders who voted for, or against, the scheme resolution, for the purposes of applying the "headcount" test, those persons who acted for multiple underlying ADS holders, and whose votes were split between for and against votes, were not counted (although those votes were counted in calculating the number of shares voting for or against the resolution). This resulted in 6 "split" proxy holders not being taken into account for the purposes of the headcount test. Even if all of those split proxy holders were to be taken into account, the headcount test under the Act would still have been satisfied. Although Bionomics had foreshadowed at the first Court hearing that it may seek dispensation from the headcount test, where a large number of Bionomics shares are held by Citicorp Nominees Pty Ltd pursuant to the ADS structure, it does not now do so given the results of the scheme meeting. 2. Mr Ahmed points out that 31.31% of available votes were cast at the scheme meeting, although only 3.17% of shareholders by number cast their votes. That level of shareholder participation was not high but was better than that achieved at Bionomics' recent annual general meetings. This matter does not suggest any defect in the notice of the scheme given to Bionomics shareholders and does not give rise to any reason not to approve the scheme. 3. Turning now to the exercise of the Court's discretion in respect of the scheme, the scheme was recommended by Bionomics' directors and the independent expert whose report was included in the scheme booklet expressed the view that the scheme was fair and reasonable and in the best interests of Bionomics shareholders in the absence of a superior proposal. Mr Ahmed also points out that existing shareholders of Bionomics will retain their existing ownership interests in its business through Neuphoria (with the exception of Ineligible Overseas Shareholders and those Small Parcel Holders who have elected to use the Sale Facility) and the redomiciliation is occurring for the business reasons that are explained in the scheme booklet, and that supports the view that the scheme is fair and reasonable to those shareholders. As I noted above, no Bionomics shareholder or other person indicated an intention to appear at the second Court hearing to oppose the scheme and there was no such appearance. I am satisfied that there is no reason to doubt that the scheme is fair and reasonable so that an intelligent and honest Bionomics shareholder, properly informed and acting alone, might approve it. 4. I am satisfied that there is otherwise no reason to doubt that Bionomics has brought to the Court's attention all matters that could be considered relevant to the exercise of the Court's discretion and that there was full and fair disclosure to Bionomics shareholders of all information material to the decision whether to vote for or against the scheme. I am therefore satisfied that the scheme is appropriate for the Court's approval. Securities Act 1933 (US) 1. As Mr Ahmed points out, Bionomics indicated at the first Court hearing that, if the scheme was approved by the Court, Neuphoria intended to rely on that approval for the purpose of qualifying for an exemption from the requirements of the Securities Act 1933 (US) ("Securities Act"). That exemption is provided for by s 3(a)(10) of the Securities Act and operates in connection with the new Neuphoria shares that will be issued pursuant to the scheme. The scope of that exemption has been reviewed in the case law and, in Re Simeon Wines Ltd (2002) 42 ACSR 454 at [22], Lander J summarised the elements of that exemption as that the relevant securities are issued in exchange for other securities; the issuer advises the Court whose order will be relied upon that the issuer itself will rely on s 3(a)(10) on the basis of the Court's approval; the Court has sufficient information before it to determine the value of the securities to be surrendered and those to be issued in the proposed transaction; the Court holds a hearing to determine whether the terms and conditions of the transaction are fair to all those who will receive securities and approval of the terms of the exchange; and the hearing is open to everyone to whom the securities would be issued in the proposed exchange and a notice of the hearing in appropriate terms has been provided in a timely manner; see also Ellerston at [18]-[19]; Re Telstra Corporation Ltd (2022) 163 ACSR 543; Re Newcrest Mining Ltd (No 2) [2023] FCA 1251; Re TASK Group Holdings Limited (No 3) [2024] NSWSC 854 ("Task Group"). 2. I accept that I should adopt that approach in Ellerston and in subsequent cases including Task Group and record that Bionomics and Neuphoria have satisfied the requisite conditions of the exemption, as follows. First, the Court was advised before the approval hearing that reliance would be placed on the s 3(a)(10) exemption on the basis of the Court's approval of the scheme and Bionomics shareholders were also informed of this in the scheme booklet; second, the Court has been informed of the securities to be offered as scheme consideration, and an independent expert report concluded that the proposal is in the best interests of shareholders; third, the Court has held a hearing to consider the fairness and reasonableness of the proposed scheme; fourth, that hearing was open to the public, and any person to whom Neuphoria shares are to be issued had standing to appear and, fifth, notice of the time and date of the approval hearing was provided through the scheme booklet. Exemption under s 411(12) of the Act 1. Bionomics also seeks an exemption pursuant to s 411(12) of the Act from compliance with s 411(11) so that a copy of the Court order approving the scheme does not need to be annexed to any copy of Bionomics' constitution that may be issued in the future. I accept that an order of this kind is properly made where, as here, the rights of shareholders in Bionomics are not modified in any way: Re Equinox Resources Ltd (2004) 49 ACSR 692; [2004] WASC 143 at [22]-[23]; Re Murchison Metals Ltd [2014] NSWSC 951 at [10]-[11]; Re The Trust Company Ltd [2013] NSWSC 1947 at [19]. Orders 1. For these reasons, I made the orders sought by Bionomics at the conclusion of the second Court hearing on 16 December 2024. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 December 2024