Federal Court of Australia

Dropsuite Limited, in the matter of Dropsuite Limited [2025] FCA 306

ORDERS

THE COURT NOTES THAT:

1.    The Australian Securities and Investments Commission (ASIC) was provided with at least 14 days’ notice of the hearing of this application.

2.    The Court is satisfied that ASIC has had a reasonable opportunity to:

(a)    examine the terms of the proposed scheme of arrangement to which the application relates (Scheme) and a draft explanatory statement relating to that Scheme; and

(b)    make submissions to the Court in relation to the Scheme and the draft explanatory statement.

3.    On 31 March 2025, ASIC provided a letter to the directors of the Plaintiff (Dropsuite) advising that it was of the view that the matters outlined at paragraphs 1 and 2 above had occurred, and that it did not propose to appear to make submissions or intervene to oppose the Scheme at the first hearing.

THE COURT ORDERS THAT:

1.    Pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Act), Dropsuite convene and hold a meeting (Scheme Meeting) of its members holding fully paid ordinary shares:

(a)    for the purpose of considering and, if thought fit, agreeing (with or without modification) to the proposed Scheme between Dropsuite and its members, the terms of which are set out in Annexure A to these orders;

(b)    to be held at 11:00am (Melbourne time) on 9 May 2025 and to be conducted simultaneously in person at Level 42, 101 Collins Street, Melbourne, Victoria and virtually via an online platform.

4.    Pursuant to ss 411(1) and 1319 of the Act, the Scheme Meeting be convened by sending on or before 7 April 2025:

(a)    to each Dropsuite shareholder who has nominated an electronic address for the purpose of receiving communications from Dropsuite or who has otherwise elected to receive communications from Dropsuite in electronic form (Email Shareholder), an email substantially in the form of the draft email at page 275 of Annexure BK-1 to the affidavit of Bill Kyriacou dated 28 March 2025 (Kyriacou Affidavit) which contains URL hyperlinks to:

(i)    a website at which the Email Shareholder may access and download an electronic copy of a document substantially in the form which appears at pages 50 to 227 of Annexure BK-2 to the second affidavit of Bill Kyriacou dated 31 March 2025 (Second Kyriacou Affidavit) (including the annexures to that document) save that on page i of the ‘Important Notices’ section (at page 52 of Annexure BK-2), under the subheading ‘Important notice associated with Court order under subsection 411(1) of the Corporations Act’, the words “and has approved the explanatory statement required to accompany the Notice of Scheme Meeting” be replaced with the words “and has directed that a copy of this explanatory statement accompany the Notice of Scheme Meeting” (with that modification, the Scheme Booklet);

(ii)    a website through which the Email Shareholder can electronically lodge proxy instructions in relation to their shareholdings and lodge questions prior to the Scheme Meeting; and

(iii)    an online meeting platform which enables the Email Shareholder to view, listen to and participate in the Scheme Meeting online;

(b)    to each Dropsuite shareholder who has nominated a physical address for the purpose of receiving communications from Dropsuite or who has otherwise elected to receive communications from Dropsuite in physical form (Hard Copy Shareholder), the following documents in hard copy:

(i)    the Scheme Booklet;

(ii)    a personalised proxy form substantially in the form which is included at pages 277 to 278 of Annexure BK-1 to the Kyriacou Affidavit (Proxy Form); and

(iii)    a reply-paid envelope for the return of completed Proxy Forms;

(c)    to each Dropsuite shareholder who is not an Email Shareholder or a Hard Copy Shareholder (Non-Electing Shareholders), the documents specified in paragraph 2(b) above in hard copy.

5.    If it comes to the attention of Dropsuite that any email dispatched to Email Shareholders in accordance with paragraph 2(a) above has returned an undeliverable or undelivered receipt for an Email Shareholder's nominated email address, Dropsuite is to dispatch to that Email Shareholder within a reasonable time thereafter the documents specified in paragraph 2(b) in hard copy.

6.    The documents referred to in paragraphs 2(b), 2(c) and 3 be sent:

(a)    in the case of shareholders whose registered address is within Australia, by prepaid ordinary post addressed to the relevant addresses recorded in Dropsuite’s share register; and

(b)    in the case of shareholders whose registered address is outside Australia, by airmail or international courier service addressed to the relevant addresses recorded in Dropsuite’s share register.

7.    In the announcement to be published on the ASX Announcements Platform stating that the Court has ordered the Scheme Meeting to be convened, Dropsuite include URL hyperlinks to:

(a)    a website through which a Dropsuite shareholder can electronically lodge proxy instructions in relation to their shareholdings and lodge questions prior to the Scheme Meeting; and

(b)    an online meeting platform which enables a Dropsuite shareholder to view, listen to and participate in the Scheme Meeting online.

8.    A proxy in respect of the Scheme Meeting will be valid and effective if, and only if, a Proxy Form is completed and delivered in accordance with its terms or a proxy is lodged online in accordance with the instructions on the website referred to in paragraphs 2(a) and 5(a) and received by Dropsuite by 11:00am (Melbourne time) on 7 May 2025.

9.    Theodore Hnarakis or, failing him, Kobe Lizheng, be chairperson of the Scheme Meeting.

10.    Dropsuite shareholders whose names are recorded in the register of members of Dropsuite at 7:00pm (Melbourne time) on 7 May 2025 will be eligible to vote at the Scheme Meeting.

11.    Voting on the resolution to agree to the Scheme is to be conducted by way of a poll.

12.    Pursuant to r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth), compliance with rr 2.4(1), 2.15, 3.4 and Form 6 is dispensed with.

13.    Dropsuite is to publish an announcement via the ASX Market Announcements Platform substantially in the form which appears at page 283 of Annexure BK-2 to the Second Kyriacou Affidavit which sets out the details for the hearing of any application to approve the Scheme and the process for any person wishing to appear at that hearing to oppose the approval of the Scheme.

14.    The notice referred to in paragraph 11 must be published at least 5 days before the date of the hearing of any application to approve the Scheme.

15.    The further hearing of the Originating Process is adjourned to the Honourable Justice Button at 10:15 am (Melbourne time) on 14 May 2025 (or as soon thereafter as the business of the Court allows) for the hearing of any application to approve the Scheme.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANNEXURE A

Scheme

[The Order entered is available on the Commonwealth Courts Portal, which attaches the Scheme.]

REASONS FOR JUDGMENT

BUTTON J

1    Dropsuite Limited (Dropsuite) has applied for orders and directions pursuant to ss 411 and 1319 of the Corporations Act 2001 (Cth) (Corporations Act) to convene and hold a meeting of the holders of its fully paid ordinary shares to consider a proposed scheme of arrangement (Scheme). Orders are also sought pursuant to r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth) (Rules) to dispense with certain requirements.

2    Dropsuite and its subsidiaries operate a cloud software platform, enabling businesses to back up, archive, recover and protect their business information and data.

3    The Scheme would, if approved by the shareholders, see NinjaOne Australia Pty Ltd (Ninja Australia) acquire all the ordinary shares in Dropsuite. Ninja Australia is a wholly owned subsidiary of NinjaOne, LLC (Ninja LLC). Ninja LLC is incorporated in the United States. It provides a cloud-based automated remote monitoring and endpoint management platform. Ninja Australia provides general sales and technical support in Australia for the software and services offered by Ninja LLC and its subsidiaries. Neither Ninja LLC nor Ninja Australia presently has any relevant interest in Dropsuite shares.

4    Dropsuite has 70,259,393 ordinary shares on issue. There are no other classes of shares in the company.

5    On 28 January 2025, Dropsuite entered into a Scheme Implementation Deed (SID) with Ninja LLC and Ninja Australia.

6    Dropsuite relied on the following affidavits:

(a)    an affidavit of Merryn Quayle, partner of Herbert Smith Freehills (solicitors for Dropsuite), dated 4 March 2025;

(b)    an affidavit of Bill Kyriacou, Dropsuite’s CFO, dated 28 March 2025 (which details matters including verification of parts of the Scheme booklet (Scheme Booklet), the voting intentions of directors and the communications plan);

(c)    an affidavit of Christopher Matarese, a director of Ninja LLC and Ninja Australia, dated 28 March 2025 (which details verification of parts of the Scheme Booklet, funding arrangements and an executed copy of the Deed Poll in favour of shareholders recorded in the Dropsuite share register as at the Scheme Record Date, being 7:00pm on the second business day after the Court’s approval orders are lodged with ASIC (Scheme Shareholders));

(d)    a further affidavit of Mr Kyriacou, dated 31 March 2025 (which exhibits the final Scheme Booklet and the proposed notice of the second Court hearing, to be published on the ASX announcements platform);

(e)    a further affidavit of Ms Quayle, dated 1 April 2025 (which exhibits a letter from ASIC dated 31 March 2025 advising, amongst other things, that ASIC did not intend to appear to make submissions or intervene to oppose the Scheme at the first Court hearing); and

(f)    a further affidavit of Mr Kyriacou, dated 2 April 2025 (which exhibits the pages of the draft Scheme Booklet provided to ASIC on 27 March 2025 to which amendments were made that were inadvertently omitted from the markup referred to in Mr Kyriacou’s first affidavit).

The Scheme

7    If approved, the Scheme would see Ninja Australia acquire 100% of the ordinary shares in Dropsuite, at an all-in cash consideration of $5.90 per share. The intention is that Dropsuite would, after implementation of the Scheme, apply to the ASX for Dropsuite to be removed from the official list of the ASX.

8    Dropsuite’s directors unanimously recommend that shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an independent expert continuing to conclude that the Scheme is in the best interests of the shareholders. Subject to the same qualifications, the directors intend to vote all Dropsuite shares they hold or control in favour of the Scheme.

9    In addition to shareholder approval, the SID stipulates a number of unexceptional conditions precedent, including:

(a)    approval by the Foreign Investment Review Board;

(b)    obtaining any necessary relief, waivers, approvals, etc from ASIC and the ASX;

(c)    the independent expert, BDO Corporate Finance Australia Pty Ltd (Independent Expert) issuing a report concluding that the Scheme is in the best interests of the shareholders, and maintaining that view to the second Court hearing; and

(d)    Court approval.

10    According to Mr Matarese’s affidavit, Ninja LLC and Ninja Australia have entered into binding equity commitments for amounts that, together with cash on hand, are sufficient to pay the total consideration required to be provided to each Scheme Shareholder (Scheme Consideration). The equity commitments are conditional only on all conditions under the SID being satisfied or waived, the Scheme becoming effective and the SID remaining in full force and effect. The funding arrangements are described in the Scheme Booklet.

11    Dropsuite has four directors. Three hold shares in Dropsuite, accounting for approximately 6.4% of the issued share capital. The Managing Director and CEO of Dropsuite is Charif Elansari. He holds approximately 4.5% of the issued share capital of Dropsuite. Mr Elansari also holds 150,000 Dropsuite Performance Rights (performance rights issued under a Dropsuite incentive plan), 60,000 of which are expected to vest prior to the Scheme Record Date, and the balance of which will be cash settled for $5.90 per Performance Right as and when they are due to vest. Mr Elansari is also to be paid an “exertion fee” of $35,000, said to be in recognition of the significant amount of additional unpaid work he has undertaken in connection with the Scheme. None of the directors has any relevant interest in Ninja LLC or Ninja Australia securities. Certain members of Dropsuite’s senior management team will also be paid, in aggregate, $87,000 in “exertion fees”. The “exertion fees” will only be paid if Scheme Shareholders approve the Scheme.

12    Other features of the SID to note are:

(a)    customary exclusivity obligations on Dropsuite;

(b)    provisions addressing how Dropsuite Performance Rights are to be dealt with, including:

(i)    the vesting of up to 867,717 Dropsuite Performance Rights prior to the Scheme Record Date (being approximately half of the total Dropsuite Performance Rights on issue, as stated in the Scheme Booklet); and

(ii)    amendment of the terms applying to the balance of the Dropsuite Performance Rights on issue to permit Dropsuite to provide a contingent cash right to receive $5.90 for each such right in lieu of receiving a Dropsuite share on vesting;

(c)    provisions by which Dropsuite is to procure a waiver from the ASX in respect of r 6.23 of the Listing Rules (concerning changes in the terms of options), or obtaining such approvals as may be needed from shareholders under r 6.23 in relation to the manner in which the Dropsuite Performance Rights are to be addressed; and

(d)    a bilateral break fee of approximately $4.2 million (equivalent to about 1% of Dropsuite’s equity value, as calculated by reference to the Scheme Consideration, and assuming the issue of a further 867,717 shares that are anticipated to have been issued pursuant to the Dropsuite Performance Rights).

13    The cash payments for the Performance Rights that are not expected to vest prior to the Scheme Record Date are to be paid by Dropsuite and will amount to $5,163,975, based on the expectation that the balance of Performance Rights in this category will be 875,250.

14    The Scheme provisions are attached to the SID and include the following relevant operative provisions:

(a)    on the Implementation Date (being the fifth business day after the Scheme Record Date), and subject to the provision of the Scheme Consideration in the manner set out in cl 5 of the Scheme, the Scheme shares are to be transferred to Ninja Australia (another provision of the Scheme appoints Dropsuite the attorney of each Scheme Shareholder);

(b)    by no later than the business day before the Implementation Date, Ninja Australia is to deposit the Scheme Consideration into an Australian dollar trust account to be operated by Dropsuite as trustee for the Scheme Shareholders (subject to provisions authorising Ninja Australia to deduct any necessary withholding tax and remit it to the Commissioner of Taxation);

(c)    Dropsuite is to pay the Scheme Consideration to each Scheme Shareholder from that trust account, on the Implementation Date; and

(d)    Ninja LLC and Ninja Australia are to execute a deed poll substantially in the form attached to the Scheme, in favour of the Scheme Shareholders.

15    On the present timetable, the Implementation Date is expected to be 30 May 2025.

16    On 28 January 2025, Dropsuite published an announcement on the ASX announcements platform. Amongst other things, the announcement said that Topline Capital Management, LLC (Topline), which then held or controlled approximately 31% of Dropsuite’s issued share capital, intended to vote its shares in favour of the Scheme. Since the publication of that announcement, Topline disposed of a significant portion of its shareholding, and (at the time of the first Court hearing) holds or controls approximately 10.5% of Dropsuite’s issued share capital. As stated in the Scheme Booklet, Topline continues to intend to vote its remaining — but still significant — shareholding in favour of the Scheme.

17    As explained in the Scheme Booklet, another Dropsuite shareholder, Harvest Lane Asset Management Pty Ltd (Harvest Lane) made an application to the Takeovers Panel (Panel) in respect of Topline’s voting intentions, as set out in the 28 January 2025 ASX announcement, and Topline’s subsequent sale of Dropsuite shares. It sought final orders requiring Topline to return to a 31% interest in Dropsuite and vote that interest in favour of the Scheme. The Panel made interim orders, on 20 March 2025, which preclude Topline selling any further shares until the earliest of: further order, determination of the Panel proceedings or two months from the date of the interim orders. Counsel for Dropsuite confirmed that it is not envisaged that the outcome of the Panel proceeding will affect the progress of the Scheme or the holding of the Scheme meeting. If there are further material developments in the Panel proceeding, Dropsuite will publish an announcement on the ASX announcements platform.

18    As mentioned above, Dropsuite’s directors appointed the Independent Expert to prepare an independent expert report (IER). The IER is an annexure to the Scheme Booklet. The IER concludes that the Scheme is fair and reasonable and is in the best interests of the shareholders, in the absence of a superior proposal. The IER assesses the value of Dropsuite’s shares on a controlling basis at between $3.92 to $5.88 per share. The Scheme Consideration ($5.90 per share) is slightly above the upper end of the Independent Expert’s range.

Communications with ASIC

19    The Scheme Booklet was provided to ASIC, in draft, on 12 March 2025. While ASIC had some queries, which it communicated to Dropsuite’s solicitors, it did not have any comments on the Scheme Booklet.

20    ASIC was sent an amended version of the Scheme Booklet on 27 March 2025. The amendments included information regarding Mr Elansari’s Performance Rights, updated information regarding Topline’s shareholding and the Panel application made by Harvest Lane, and updated information regarding the time and place of the meeting and arrangements for submitting online proxy forms.

21    ASIC suggested, and Dropsuite agreed, that Topline’s votes should be “tagged”, meaning its votes are specifically marked and reported. This will enable verification that Topline voted in accordance with its publicly stated intention and, if necessary, for it to be determined whether the voting of Topline’s shares was determinative.

22    ASIC was provided with a further revised Scheme Booklet and an updated draft IER on 30 March 2025. The amendments made to the IER concerned matters of detail (in particular, up to date information concerning Dropsuite’s significant shareholders, updated figures for various share price trading data and an updated list of company announcements). The section of the IER discussing the Reserve Bank of Australia’s statements concerning the economic outlook, particularly in relation to inflation, were also updated.

23    On 31 March 2025, ASIC confirmed that it did not propose to appear to make submissions or intervene to oppose the Scheme at the first Court hearing.

The meeting and communications with shareholders

24    The meeting of shareholders is to be conducted on 9 May 2025 at 11:00am (Melbourne time) simultaneously in person at level 42, 101 Collins St, Melbourne and virtually via an online platform.

25    The orders sought by Dropsuite provide for shareholders who have specified an electronic address for communications to be sent an email that will include links to:

(a)    a website at which the Scheme Booklet can be downloaded;

(b)    a website through which proxy instructions can be electronically lodged, and on which questions can be lodged prior to the meeting; and

(c)    the online platform through which shareholders can view, listen to and participate in the meeting.

26    Shareholders who have specified a physical address for communications (as well as those who have expressed no preference as to the means by which they wish to receive communications, or those to whom an email was sent, but delivery failed) will be sent a hard copy of the Scheme Booklet, a personalised proxy form and a reply-paid envelope for the return of the completed proxy form.

27    Shareholders receiving hard copy materials will also be able to lodge proxy instructions electronically and participate in the meeting via the online platform. They will be advised of the relevant URL addresses by s 3.2(c) of the Scheme Booklet and the Notice of Scheme Meeting (annexure 4 of the Scheme Booklet). Dropsuite will also include the URL hyperlinks in an announcement to be published on the ASX announcements platform stating that the Court has ordered the meeting.

28    Dropsuite has engaged a third party firm to assist in a program of outbound phone calls to its top 1,000 shareholders and in engaging with certain institutional shareholders. In his first affidavit, Mr Kyriacou deposed to this intended engagement program. In his second affidavit, Mr Kyriacou exhibited the call scripts to be deployed, consistent with the contents of the Scheme Booklet and the recommendations stated therein. Mr Kyriacou’s first affidavit also deposed to the arrangements made with another third party firm to assist with a shareholder information line, and exhibited the inbound call scripts to be deployed, consistent with the contents of the Scheme Booklet and the recommendations stated therein.

29    The orders proposed by Dropsuite provided for Theodore Hnarakis or, failing him, Kobe Lizheng, to be the chairperson of the meeting.

30    Mr Hnarakis is one of Dropsuite’s directors. He indirectly holds 1,175,232 shares in Dropsuite. Mr Hnarakis is not eligible to receive, and does not have, any Performance Rights.

31    Mr Lizheng is the Company Secretary. He holds 21,875 shares and 5,625 Performance Rights.

32    Mr Kyriacou’s affidavits depose to his having been informed by each of Mr Hnarakis and Mr Lizheng that he is willing to be the chairperson of the meeting and that, otherwise than as disclosed in the Scheme Booklet or Mr Kyriacou’s affidavits, neither Mr Hnarakis nor Mr Lizheng has any previous relationships or dealings with Nina LLC or Ninja Australia, and neither has any interest or obligation that may give rise to a conflict of interest.

33    The orders sought by Dropsuite also provided for the meeting chairperson to have the power to adjourn the meeting, and for Dropsuite to have the power to postpone the meeting, to such time, date and place as considered appropriate. The proposed orders went further, and stipulated which shareholders could participate in any adjourned meeting. At the first Court hearing, Dropsuite relied on Re PR Finance Group Limited [2013] FCA 504 (Farrell J) in support of the proposition that such orders are increasingly made in the context of schemes of arrangement as “a matter of administrative convenience”. Dropsuite also relied on Re Selfwealth Ltd [2025] FCA 214 (O’Bryan J) as an example of a case in which such orders have been made.

34    I declined to make the orders sought. Although, on one view, such orders may avoid unnecessary further applications to the Court in the event that a need to adjourn or postpone the meeting arises, the orders proposed by Dropsuite made no provision for all of the necessary machinery associated with a meeting being convened pursuant to the Court’s orders, such as orders for updated notices to be sent to shareholders, revised proxy forms and communications with shareholders. In circumstances where counsel for Dropsuite confirmed there is no specific matter that it anticipates will necessitate adjournment or postponement (and that the proposed orders were included simply for administrative convenience), I am not satisfied that such orders are necessary or appropriate.

Consideration

Principles

35    In its submissions, Dropsuite relied on O’Bryan J’s summary of the applicable principles in Re Rex Minerals Limited [2024] FCA 1051 (Re Rex Minerals) at [21]–[27]:

21.     Part 5.1 of the Act provides a procedure whereby an arrangement between a company and its members can be made binding on all members. Section 411 is the principal provision. The procedure involves three main steps:

(a)     an application to the Court for an order to convene a scheme meeting (s 411(1));

(b)     if such an order is made, the convening of such a meeting at which a resolution to agree to the scheme is considered (s 411(4)(a)); and

(c)     if the resolution is passed by the necessary majorities, an application to the Court for an order approving the scheme (ss 411(4)(b) and 411(6)).

22.     The present application concerns the first stage, being an application to the Court for an order to convene the Scheme Meeting. Section 411 of the Act confers a discretion on the Court to make an order convening the Scheme Meeting if certain statutory conditions are met, namely:

(a)     an arrangement is proposed between a Pt 5.1 body and its members (or any class of them (s 411(1));

(b)     an application for the order is made in a summary way by that body (s 411(1));

(c)     14 days’ notice of the hearing of the application has been given to ASIC (or such lesser period as the Court or ASIC permits) (s 411(2)(a)); and

(d) the Court is satisfied that ASIC has had a reasonable opportunity to:

(i)     examine the terms of the proposed arrangement to which the application relates and a draft explanatory statement relating to the proposed arrangement; and

(ii)     make submissions to the Court in relation to the proposed arrangement and the draft explanatory statement required by s 412 (ss 411(2)(b) and 411(3)).

23.     In addition to these requirements of s 411, the procedure is regulated by s 412 of the Act and reg 5.1.01 and Sch 8 to the Corporations Regulations 2001 (Cth) (Regulations), and by the Federal Court (Corporations) Rules 2000 (Cth) (Rules). The Regulations and the Rules prescribe certain information which is required to be sent to the members about the Scheme.

24.     The principles which apply to the exercise of the Court’s discretion at this first stage are well-known. In Re Amcor Ltd [2019] FCA 346 (Amcor), Beach J described the Court’s role at the first court hearing as follows (at [47], emphasis in original):

My function on an application to order the convening of a meeting is supervisory. At this stage I should generally confine myself to ensuring that certain procedural and substantive requirements have been met including dealing with adequate disclosure, with limited consideration of issues of fairness. But having said that, it is appropriate to consider the merits or fairness of a proposed scheme at the convening hearing if the issue is such as would unquestionably lead to a refusal to approve a proposed scheme at the approval hearing, that is, the proposed scheme appears now to be on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J).

25.     It is not the Court’s role to usurp the shareholders’ decision whether to agree to a scheme. The question whether or not to accept particular consideration for shares is quintessentially a commercial matter for the members to assess, and they ought not be prevented from having the opportunity to do so, provided that the Court can be satisfied that they are acting on sufficient information and with time to consider what they are voting on: Crown Resorts Ltd, in the matter of Crown Resorts Ltd [2022] FCA 367 at [27], citing Amcor at [50] and Re ACM Gold Ltd (1992) 34 FCR 530 at 534.

26.     Therefore, if the arrangement is one that seems fit for consideration by the meeting of members, and is a commercial proposition likely to gain the Court’s approval if passed by the necessary majorities, then orders should be made to convene the meeting: Re Foundation Healthcare Ltd [2002] FCA 742; 42 ACSR 252 (Foundation Healthcare) at [36].

27.     In summary, the Court’s task at the first court hearing is to assess first, whether the statutory prerequisites to the making of orders convening a meeting have been met and second, whether it is appropriate for the Court to exercise its discretion in favour of making those orders.

36    This summary accurately captures the Court’s task. I also refer to, without repeating, my summary of the authorities in Re Clemenger Group Limited [2023] FCA 815 at [44]–[46].

Corporations Act and Corporations Regulations

37    I will first address compliance with the matters specified in the Corporations Act and the Corporations Regulations 2001 (Cth) (Corporations Regulations).

38    The Scheme is an arrangement proposed between a Pt 5.1 body and its members. It is an “arrangement” for the purpose of s 411(1) of the Corporations Act.

Notification of ASIC

39    On 12 March 2025, ASIC was given notice of the first Court hearing. Accordingly, it has been given at least 14 days’ notice of the hearing of the application, as required by s 411(2)(a) of the Corporations Act. A copy of the draft Scheme Booklet was also lodged with ASIC on 12 March 2025, and amended versions of the Scheme Booklet were provided to ASIC on 27 March 2025 and 30 March 2025.

40    On 31 March 2025, ASIC provided a letter confirming that it had been given the requisite 14 days’ notice, and had a reasonable opportunity to examine the terms of the Scheme and the draft explanatory statement (being the Scheme Booklet), and to make submissions to the Court in relation to the Scheme and the draft explanatory statement. ASIC’s letter confirmed that it did not propose to appear at the first Court hearing.

41    I am satisfied that ASIC has had a reasonable opportunity to examine the terms of the proposed arrangement and to make submissions in relation to the arrangement and the draft explanatory statement, as required by s 411(2)(b) of the Corporations Act.

Explanatory statement

42    The information to be provided to shareholders is governed by s 412 of the Corporations Act, and reg 5.1.01 and Sch 8 (Pt 3) of the Corporations Regulations.

43    Dropsuite made the following submissions regarding these requirements and their satisfaction in respect of the proposed Scheme (emphasis in original, citations omitted):

(a)     first, the explanatory statement must explain the effect of the compromise or arrangement, and in particular state any material interest of the directors, and the effect on those interests of the compromise or arrangement so far as it is different from the effect on the like interests of other persons. The effect of the Scheme is addressed in the letter from the Chairman of Dropsuite in the Scheme Booklet, and it is also addressed in section 4 of the Scheme Booklet. The required information in relation to the material interests of directors is addressed in section 9 of the Scheme Booklet;

(b)     secondly, the explanatory statement must set out the prescribed information, being the information set out in reg 5.1.01 and Schedule 8 of the Regulations. The evidence as to verification of the Scheme Booklet demonstrates that these requirements have been satisfied; and

(c)     thirdly, the explanatory statement must set out any other information that is material to the making of a decision whether or not to agree to the compromise or arrangement. In this respect, it is submitted that the Scheme Booklet is clear and comprehensive, and (along with the IER annexed to the Scheme Booklet) contains a detailed evaluation of the Scheme, presented in a way that enables a Dropsuite shareholder to form his or her own view of the merits of the Scheme.

44    I accept Dropsuite’s submissions as to the nature, and satisfaction, of those requirements.

45    Additional assurance in relation to the explanatory statement (being the Scheme Booklet) is provided by s 412(6)–(8), which requires that the Scheme Booklet be registered by ASIC. Pursuant to s 412(8), in order to register the Scheme Booklet ASIC must have formed the opinion that it does not contain any matter that is false in any material particular, or is materially misleading. As referred to above, a draft Scheme Booklet was lodged with ASIC on 12 March 2025, and revised drafts were provided to ASIC on 27 March 2025 and 30 March 2025. ASIC has not provided any comments with respect to these drafts and, on 31 March 2025, confirmed that it did not intend to make submissions or intervene to oppose the Scheme at the first Court meeting.

Corporations Rules

46    Dropsuite seeks an order under r 1.3 of the Rules, dispensing with compliance with:

(a)    r 2.4(1) to the extent that the rule requires the affidavit filed with the Originating Process to state all the facts in support of the Originating Process;

(b)    r 2.15; and

(c)    r 3.4 and Form 6.

47    Rule 2.4(1) relevantly requires that, unless the Court otherwise directs, an originating process must be supported by an affidavit stating the facts in support of the process. Here, the Originating Process was accompanied by the first affidavit of Ms Quayle, exhibiting the SID and a Dropsuite company search (as required by r 2.4(2)). The substantive facts were stated in subsequent affidavits provided prior to the first Court hearing. Dropsuite ought to be relieved from the default requirement to set out the substantive facts in the commencing affidavit. It is appropriate that there be dispensation from compliance with r 2.4(1).

48    Rule 2.15 applies Div 75 of the Insolvency Practice Schedule (Corporations) (being Sch 2 to the Corporations Act) and Div 75 of the Insolvency Practice Rules (Corporations) 2016 (Cth) to meetings ordered by the Court, subject to the Corporations Act, the Rules and any direction of the Court. However, here, the matters otherwise covered by those provisions are addressed by a combination of the orders of the Court in relation to the convening and chairing of the meeting, the terms of the materials being disseminated in respect of the Scheme (including the Notice of Scheme Meeting, proxy forms and arrangements in relation to proxies) and otherwise by the company’s constitution. It is appropriate that there be dispensation from compliance with r 2.15.

49    Rule 3.4 relevantly provides that, where there is an application under s 411(4) of the Corporations Act for an order approving (inter alia) an arrangement in relation to a Pt 5.1 body, unless the Court otherwise orders, a notice of the hearing of the application is to be published in a daily newspaper circulating in the State or Territory where the body has its principal, or last known, place of business. The notice is required to be in accordance with Form 6. Dropsuite is listed on the ASX. It is likely that dissemination of information concerning the second Court hearing by an announcement on the ASX announcements platform will be more effective than publication of a notice in a newspaper. Accordingly, it is appropriate, and consistent with the Court’s Schemes of Arrangement Practice Note, that there be dispensation from compliance with r 3.4 and Form 6.

50    As set out in Dropsuite’s written submissions, the requirements imposed by r 2.4(2) (regarding provision of a recent company extract), r 3.2(a)–(b) (concerning evidence regarding the willingness of the proposed chairperson of the meeting, that person’s dealings and any conflicts of interest) and r 3.3(1) (providing for the orders, if made, to annex a copy of the Scheme) have been complied with.

Exercise of discretion

51    In my view, the Scheme is fit for consideration by Dropsuite’s shareholders. The Scheme is simple in its terms and is proposed on a basis that is not obviously unfair to shareholders. Nor does it suffer any other deficiency such that it should not be permitted to go forward for consideration by the shareholders. There is no matter presently appearing on the materials that would mean that the Court would be likely to refuse to approve the Scheme at the second Court hearing, if it is agreed to at the meeting convened pursuant to the Court’s orders made following the first Court hearing. There is nothing that is so blatantly unfair or otherwise inappropriate about the Scheme that it should be “stopped in its tracks”: Re Foundation Healthcare Ltd (2002) 42 ACSR 252; [2002] FCA 742 at [44] (French J).

52    As set out above, the SID contains terms of a kind that are common in schemes of arrangement for the transfer of all shares in a company to the acquirer: warranties, exclusivity arrangements and break fees. Although such commercial matters do not strictly form part of a scheme, they can be scrutinised, particularly where the terms are of a kind that exert real pressure on shareholders to agree to the scheme: Re Rex Minerals at [37] (O’Bryan J). In my view the terms (including as to the break fee payable) do not raise any concerns of that character. They are, as noted, standard in schemes of this kind. Further, the break fee is not payable by reason of the shareholders failing to approve the Scheme, and is set at a level (approximately 1% of Dropsuite’s equity value) that is consistent with, and has triggers that are consistent with, the guidance issued by the Panel.

53    Dropsuite’s submissions raised, and addressed, a number of additional matters in respect of the Scheme.

54    Dropsuite pointed to the following as adequately managing performance risk:

(a)    the terms of the SID are such that the aggregate Scheme Consideration is to be deposited into a trust account operated by Dropsuite as trustee for the Scheme Shareholders on the Implementation Date;

(b)    the terms of the SID oblige Ninja LLC to deposit the aggregate Scheme Consideration if Ninja Australia does not;

(c)    both Ninja LLC and Ninja Australia have executed a Deed Poll in favour of the Scheme Shareholders under which, inter alia, undertakings are given in respect of the deposit of the aggregate Scheme Consideration;

(d)    shares will only be transferred to Ninja Australia once the Scheme Consideration has been provided to the Scheme Shareholders, obviating any risk that shareholders will be obliged to transfer their shares before receiving the promised consideration;

(e)    as is described in the Scheme Booklet, Ninja Australia and Ninja LLC intend to fund the anticipated total Scheme Consideration ($419,649,949) from:

(i)    equity funding (as to which it has letters of commitment totalling the US dollar equivalent of $397,499,962.83 from two funds); and

(ii)    as to the balance ($22,149,986.17), from their existing cash reserves (which, in Ninja LLC’s case, presently stand at the US dollar equivalent of $88.6 million).

55    I accept Dropsuite’s submission that these matters adequately protect against performance risk and are adequately explained in the Scheme Booklet.

56    In relation to the Performance Rights, as noted above, some of the Performance Rights are expected to vest and convert into shares before the Scheme Record Date, and the remainder will be settled for a cash payment of $5.90 each as and when they would otherwise vest and result in the issue of shares. According to the “Key Dates” section of the Scheme Booklet, the Scheme Record Date is anticipated to be 7:00pm on 16 May 2025, and the Implementation Date is anticipated to be 30 May 2025.

57    Given that the holders of the Performance Rights will either have them convert to shares before the Scheme Record Date, or will be paid the same amount in respect of each right as the person would receive had the rights converted to shares, and given that the cost of the payments in lieu of shares will be borne wholly by Dropsuite once it is a subsidiary of Ninja Australia (if the Scheme proceeds), I do not consider that the Performance Rights holders constitute a different class of shareholders for the purposes of s 411(1). Rather, the interests of Performance Rights holders are not so different that they cannot consult with the shareholders at large, to consider the Scheme: see, eg, Re Rex Minerals at [39] (O’Bryan J).

58    As to the interests of Dropsuite’s directors, as noted above, Mr Elansari has a substantial personal shareholding, holds a significant number of Performance Rights and is to be paid an “exertion fee”. It is not proposed that Mr Elansari chair the meeting.

59    I accept Dropsuite’s submission that, although Mr Elansari has a substantial personal interest in the fate of the proposed Scheme, it is appropriate that shareholders be advised of his recommendation, along with the recommendations of Dropsuite’s other directors. What the Managing Director and CEO recommends, and how he proposes to vote his significant shareholding, are relevant pieces of information that shareholders should be aware of. Shareholders can weigh his recommendation in light of the nature of Mr Elansari’s interests, which are adequately disclosed in the Scheme Booklet.

60    As to Topline’s shareholding and voting intentions, the Scheme Booklet advises that Dropsuite will inform shareholders of any material developments arising out of the Panel proceeding, by releasing an ASX announcement.

61    I am also satisfied that the information to be provided to shareholders is adequate as it fulfils the statutory requirements. In addition, shareholders will be assisted by the IER in considering and assessing the proposed Scheme.

62    As ASIC has not opposed the application for orders convening the meeting, I proceed on the basis that there is presently no indication that ASIC will decline to provide a letter of the kind referred to in s 411(17)(b) of the Corporations Act (being a letter that ASIC has no objection to the compromise or arrangement). Accordingly, the requirement that such a letter be provided before a scheme is ultimately approved at the second Court hearing does not present any impediment to the Court making the orders sought by Dropsuite to convene the meeting.

Conclusion

63    In this case, I am satisfied that, if the Scheme achieves the necessary majorities at the meeting, there is no reason that is presently apparent which would cause the Court not to approve the Scheme at the second Court hearing, if it is unopposed. Having regard to the matters set out above concerning the draft Scheme Booklet and the means by which it is to be distributed, I am also satisfied that Scheme Shareholders will be properly informed as to the nature of the Scheme before the meeting.

64    Accordingly, orders were made on 2 April 2025 for the first meeting to be convened, together with ancillary orders.

Associate:

Dated: 2 April 2025