AUSTRALIA Law and Practice Contributed by: John Schembri and Erin Cartledge, Gilbert + Tobin
corresponding to the threshold for the com- pulsory acquisition – or “squeeze-out” of minorities). Schemes of Arrangement A scheme of arrangement is a court-approved arrangement entered into between a body (ie, the target) and all of its members, or a class thereof. For a scheme to become binding on the target and its members (or the relevant class thereof), it must be approved by more than 50% of members who vote on the scheme, and those members must represent at least 75% of the votes cast on the scheme. If these thresholds are met, the scheme is binding on all members (or all members in the relevant class), including those who vote against it or who do not vote at all. The typical operation in the context of an acqui- sition financing is for the scheme to affect the transfer of target securities to the offeror in exchange for a specified consideration. A scheme of arrangement is a target-driven process, with the target preparing the neces- sary materials and seeking the necessary orders from the court. As such, a scheme requires the support of the target’s directors and, therefore, is only a viable option in “friendly” transactions. As with “off-market” bids, schemes can be subject to conditions, and it is common to see schemes being subject to the receipt of any nec- essary regulatory approvals, together with the non-occurrence of any material adverse effect with regard to the target. In addition, there are standard conditions relating to the necessary shareholder and court approvals. Certain Funds Requirements Neither of the aforementioned methods impos- es a strict legal requirement for “certain funds”
financing. However, from a practical perspec- tive, financiers’ commitments to fund are often provided on a certain funds basis. The Corporations Act prohibits persons from making a takeover offer if they are unable to complete the offer, or are reckless as to whether they are able, to complete the offer. The Aus- tralian Takeovers Panel has separately indicated that, where an offer is funded by debt, the bid- der would have binding commitments from its financiers at the time of announcing its offer and would not declare an offer as unconditional unless it was highly confident it could draw down the facilities (ie, binding funding arrangements are documented in final form and commercially significant conditions precedent to draw have been satisfied or there is no material risk that the conditions precedent would not be satisfied). As part of the court-led scheme of arrangement process, the offeror will be required to satisfy the court that it has sufficient funds to pay the scheme consideration and complete the trans- action. From a practical perspective, this often results in an offeror seeking “certain funds” financing from its financiers. However, unlike other jurisdictions, such as the United Kingdom, there is no requirement to have these funding arrangements verified or for “cash confirmations” to be provided by a financial adviser to the bidder. 10. Jurisdiction-Specific Features 10.1 Other Acquisition Finance Issues There are no further considerations relevant to acquisition financing in Australia.
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