The recent decision of Black J in Re Paladin Energy Limited (subject to deed of company arrangement)1 concerned the administrators’ application under s444GA of the Corporations Act for orders to transfer 98% of the fully paid shares in Paladin Energy Limited (the Company) from the members of the Company to trustees pursuant to a deed of company arrangement (DOCA).
Section 444GA of the Corporations Act can be enlivened by administrators in restructure scenarios where the administrator is seeking leave of the Court to transfer shares in the Company in order to give effect to a DOCA.
It is predominantly used in circumstances where the shares in the Company do not have any residual value.
In Re Paladin two of the shareholders of the Company opposed the administrators’ application. They contended there was value in the shares of Paladin.
The administrators’ evidence detailed that on a best case scenario, there was a US$99 million dollar deficiency in assets against debts of the Company. The shareholders argued that the administrators’ evidence did not take into account the changes in the spot price of uranium, and the alleged (but unsupported) fact that it may have been possible for the administrators to procure a transaction that resulted in less than 98% of the members’ shares being transferred.
His Honour Black J rejected the shareholders’ arguments. He was satisfied that the shares in the Company did not have residual value, on a going concern basis, or on a “distressed” going concern basis, or in a liquidation which would likely follow from the failure of the application and the consequential failure of the DOCA.
His Honour made orders for the compulsory transfer of the shares.
[1] [2018] NSWSC 11.
