Backdoor listings provide the means for companies to seek out a listing as an alternative to the conventional process of applying to be admitted to the official list under Listing Rule 1.1. In the current voluntary administration market, ASX-listed companies in external administration are increasingly hot property in anticipation of ASX listing rule changes.
As a result, we have seen an increase in administrators of listed companies being presented with competing proposals both generally and in the days between issuing their report to creditors pursuant to section 75-225 of the Insolvency Practice Rules (Corporations) 2016 (IPR) and the convening of the second creditors meeting (Meeting) pursuant to section 439A of the Corporations Act.1
When competing late breaking proposals are received prior to the Meeting but after the major report has issued, practitioners may consider circulating:
This will assist creditors to digest the proposals prior to the Meeting and preferably avoid prolonged analysis of each the proposals during the Meeting.
It is useful for administrators to form a strategy for dealing with competing proposals prior to the Meeting, even if that means standing the Meeting down for a brief period of time.
Opinions and recommendations
Prior to initiating any resolutions at the Meeting an administrator might:
Proponents may be invited to speak to their proposals at the Meeting however, an administrator might consider placing strict time limits and limitations on questions. This is only required in circumstances where an administrator has not provided an update with enough detail in respect of the competing proposals, with questions from the floor.
Administrators may also consider:
To comply with procedural matters and to give the vote integrity, a carefully considered resolution is important. A resolution can be put in such a way that it is passed in favour of DOCA [x] and all other proposals are rejected, which if passed means no further resolutions are required on other proposals.
If a poll is called and no result is determined, an administrator may exercise their casting vote pursuant to section 75-115 of the IPR by either voting:
If a casting vote is not exercised then the resolution is not passed.
Receipt of further proposal(s) very late in time (or during the Meeting) may result in an administrator being unable to form an opinion and make a recommendation immediately. An administrator has the power to adjourn the Meeting, pursuant to section 75-140 of the IPR.
Prior to the introduction of the IPR, section 439B(2) of the Act provided that creditors of a company had the ability to adjourn the Meeting for a period not exceeding 45 Business Days.
As part of the introduction of the IPR, section 439B of the Act has been repealed. Section 75-140 of the IPR provides that an administrator presiding over the Meeting has the ability to adjourn without the need for creditor approval for a period of up to 45 business days after the day on which the original meeting was held.
Meetings concerning listed entities can range from a routine affair to an all out auction between competing proposals and administrators must be prepared to address the various challenges which may arise. The introduction of the IPR provides a neatly packaged set of meeting rules and procedure for practitioners to follow, division 75 of the IPR should always be your starting point.