Federal Court of Australia

NSX Limited, in the matter of NSX Limited [2025] FCA 1133

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to ss 411(1) and 1319 of the Corporations Act 2001 (Cth) (Corporations Act), the plaintiff convene and hold a meeting (Scheme Meeting) of holders of fully paid ordinary shares in the plaintiff and partly paid ordinary shares in the plaintiff (other than CNSX Markets Inc. and its Related Bodies Corporate (as defined in the Corporations Act), or an Associate (as defined in the Corporations Act) of CNSX Markets Inc. and its related bodies corporate) (Scheme Shareholders) for the purpose of considering and, if thought fit, agreeing to (with or without amendment) a scheme of arrangement proposed to be entered into between the plaintiff and the Scheme Shareholders (Scheme), the terms of which are contained in Exhibit A as provided to the Court on 9 September 2025 (Scheme Booklet).

2.    Pursuant to s 1319 of the Corporations Act:

(a)    the Scheme Meeting be held on 10 October 2025, commencing at 12.00pm (Sydney time) and be conducted:

(i)    in person at Suite 20.02, Level 20, Australia Square, 264-278 George Street, Sydney NSW 2000; and

(ii)    virtually by means of an online meeting platform accessible via the following URL address: https://meetings.lumiconnect.com/300-808-093-900.

(b)    The Scheme Shareholders who are eligible to vote at the Scheme Meeting will be those shareholders whose names are recorded in the register of members of the plaintiff (Register) at 7.00pm (Sydney time) on 8 October 2025 (Voting Entitlement Time).

(c)    The plaintiff may determine that only the proxy forms in relation to the Scheme Meeting that are received by the plaintiff by 12:00pm on 8 October 2025 (Sydney time) are valid.

(d)    Timothy Hart, or failing him, Tod McGrouther, be Chair of the Scheme Meeting.

(e)    The Chair of the Scheme Meeting will have the power to adjourn the Scheme Meeting in his absolute discretion to such time, date and place as he considers appropriate.

(f)    At the Scheme Meeting, three Scheme Shareholders, present and entitled to vote, in person or by proxy, or by an attorney under power, or in the case of corporate Scheme Shareholders, by corporate representatives, shall constitute a quorum.

(g)    At the Scheme Meeting each Scheme Shareholder, present and entitled to vote, will be entitled to:

(i)    one vote for each fully paid ordinary share; and

(ii)    one one-hundredth (1/100) of a vote for each partly paid ordinary share (proportionate to the amount paid up on that partly paid ordinary share),

in the capital of the plaintiff that the Scheme Shareholder is registered as holding at the Voting Entitlement Time.

(h)    Voting on the resolutions to approve the Scheme be conducted by way of poll and any provision in the constitution of the plaintiff requiring voting to be by show of hands will be disregarded for this purpose.

(i)    The plaintiff may provide access to the Scheme Meeting for such other persons as it considers appropriate.

3.    The Scheme Booklet, substantially in the form of Exhibit A, which comprises the explanatory statement as required by s 412(1)(a) of the Corporations Act, be and is hereby approved for the purposes of s 411(1) for distribution to Scheme Shareholders, subject to any minor amendments made by the Court or required and approved by the Australian Securities and Investments Commission (ASIC) for the purposes of registration under s 412(6) of the Corporations Act.

4.    Subject to registration of the Scheme Booklet with ASIC pursuant to s 412(6) of the Corporations Act, the Scheme Booklet be dispatched to each Scheme Shareholder whose name is recorded in the Register as being a shareholder as at 7.00pm on 5 September 2025 (the Register Time) in the following manner:

(a)    by sending an email to each Scheme Shareholder who has elected to receive shareholder communications by email, containing electronic links where they may access and download the Scheme Booklet (which includes the Notice of Scheme Meeting at Annexure D to the Scheme Booklet), and lodge an electronic proxy appointment for the Scheme Meeting and access voting instructions online;

(b)    by posting to the address recorded in the Register of each Scheme Shareholder who has elected to receive shareholder communications in hard copy (only) by prepaid post (for each Scheme Shareholder with an address in Australia) or by prepaid airmail (for each Scheme Shareholder with an address outside Australia), a printed Scheme Booklet (including the Notice of Scheme Meeting), a proxy form substantially in the form of the document set out at Annexure E of the Scheme Booklet (Proxy Form), a cover letter and a return envelope; and

(c)    to each Scheme Shareholder who has not made an election for either electronic communications or hard copy communications (or has elected to receive only certain communications electronically and certain communications in hardcopy), by posting to their address recorded on the Register by prepaid post (for each Scheme Shareholder with an address in Australia) or by prepaid airmail (for each Scheme Shareholder with an address outside Australia) a hard copy notice of access letter containing details of a website where they may access the Scheme Booklet (including the Notice of Scheme Meeting) and a Proxy Form.

5.    If the plaintiff, through Boardroom Pty Limited, receives an email notification of a failure to deliver an email to a Scheme Shareholder’s nominated email address, the Scheme Booklet is to be dispatched to that shareholder as described in Order 4(c).

6.    Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and the provisions of the plaintiff’s constitution that are not inconsistent therewith and that apply to meetings of members.

7.    The Plaintiff is not obliged to send the documents referred to in order 4 above to any person who becomes a Scheme Shareholder after the Register Time.

Dispensation from Federal Court (Corporations) Rules 2000 (Cth)

8.    Pursuant to r 1.3 of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules), the plaintiff be relieved from compliance with:

(a)    r 2.4 of the Corporation Rules;

(b)    r 2.15 of the Corporations Rules save in respect of the application of r 75-15(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth); and

(c)    r 3.4 and Form 6 of the Corporations Rules, conditional on the plaintiff publishing on or before 9 October 2025 an announcement via the ASX Market Announcements Platform substantially in the form exhibited at page 406 of Exhibit MC-2 (tab 45).

9.    The proceeding be stood over until 10:15am on 14 October 2025 (Sydney time) before Owens J for the hearing of any application to approve the Scheme and for related orders.

10.    These orders be entered forthwith.

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

REASONS FOR JUDGMENT

OWENS J:

1    The plaintiff, NSX Limited, applies for orders under s 411(1), and directions pursuant to s 1319, of the Corporations Act 2001 (Cth) for the convening of a meeting of its shareholders to consider a proposed scheme of arrangement which, if implemented, would see all of the company’s shares acquired by CNSX Markets Inc. On 9 September 2025, I made the orders and directions sought. These are my reasons for doing so.

2    NSX is a public company limited by shares and is listed on the Australian Securities Exchange. NSX is the holding company of, amongst other NSX group entities, National Stock Exchange of Australia Limited (ACN 000 902 063). The latter is the holder of a tier-1 Australian market licence and operates a regulated securities exchange known as "the NSX" in Sydney. The NSX is an alternative stock exchange to the ASX and principally targets small and micro-cap companies.

3    As at 5 September 2025, NSX had on issue:

(a)    503,409,349 fully paid ordinary shares;

(b)    1,500,000 partly paid ordinary shares (with $0.01 paid and $0.99 unpaid);

(c)    13,108,889 performance rights issued by the NSX board under NSX’s employee performance rights policy; and

(d)    7,500,000 options.

4    CNSX is a private Canadian corporation registered under the Business Corporations Act (Ontario). It operates a securities exchange in Canada under the business name “Canadian Securities Exchange”. CNSX is a substantial holder of NSX shares, with an interest in 24,400,000 NSX shares, accounting for 4.85% of NSX’s issued capital.

5    CNSX Global Markets Inc. is also a private corporation registered in Canada. It was incorporated, among other things, to facilitate CNSX’s reorganisation, which when completed, will result in CNSX Global owning 100% of the shares in CNSX.

6    On 19 May 2025, NSX entered into a scheme implementation deed with CNSX. The proposed scheme is an all-cash consideration scheme. Under the terms of the deed (as subsequently varied), CNSX or its nominee agreed to acquire 100% of the fully paid and partly paid issued capital in NSX that it did not already own by way of a scheme of arrangement for $0.04 per fully paid NSX share and $0.0004 per partly paid NSX share. Following implementation of the scheme, NSX will delist from the ASX.

7    CNSX has incorporated and nominated BidCo as its nominee for the purposes of the deed. BidCo is a wholly owned subsidiary of CNSX Global and a related body corporate of CNSX. The effect of the scheme will be to make NSX a wholly owned subsidiary of BidCo.

8    If approved, the scheme will be implemented by CNSX depositing or procuring the deposit of an amount equal to the aggregate scheme consideration payable to all scheme shareholders into an Australian trust account operated by Boardroom Pty Ltd (NSX’s share registry) as trustee for the scheme shareholders no later than two business days before the date the scheme is implemented. NSX will then pay the scheme consideration on the implementation date to each scheme shareholder.

9    A scheme booklet has been prepared for the scheme. It sets out a description of the scheme, its advantages and disadvantages, and annexes a range of relevant documents. One of those documents is a report of an independent expert appointed in relation to the scheme, Mr Colin Prasad of Moore Australia (VIC) Pty Ltd, expressing the view that the proposed scheme is fair and reasonable and in the best interests of NSX’s shareholders.

10    The NSX board unanimously recommend that NSX shareholders vote in favour of the scheme at the scheme meeting, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interest of NSX shareholders.

EVIDENCE

11    NSX relied on the following evidence:

(a)    An affidavit of Neil Wallman, the solicitor on the record for NSX, affirmed 30 June 2025, along with the documents contained in Exhibit NW-1 comprising company searches for NSX performed on 18 June 2025, a copy of the announcement made by NSX to the ASX dated 19 May 2025 and the scheme implementation deed.

(b)    An affidavit of Maxwell Cunningham, the Managing Director and Chief Executive Officer of NSX, affirmed 7 September 2025, along with the documents contained in Exhibit MC-2. Mr Cunningham gave evidence about the business and capital structure of NSX and provided an overview of the main features of the scheme and the scheme implementation deed. He addressed various matters such as the new facility agreement between NSX and ISX Financial EU Plc, the support facility provided by CNSX to NSX, the treatment of NSX performance rights and options, the exclusivity and break fee provisions in the scheme implementation deed as well as the NSX board’s consideration of the scheme. He also addressed matters regarding the scheme meeting, the verification of the scheme booklet and provided an overview of the proposed communications with NSX shareholders.

(c)    An affidavit of Tracey Stern affirmed 7 September 2025, along with a number of annexures. Ms Stern is the Chief Legal Officer, General Counsel and Corporate Secretary of CNSX and a director of CNSX Global and BidCo. Among other things, Ms Stern addressed the verification process for CNSX information in the scheme booklet and CNSX’s communications with ASIC.

governing PRINCIPLES

12    In Xplore Wealth Limited, in the matter of Xplore Wealth Limited [2020] FCA 1868 at [23]-[24], Markovic J summarised the principles that apply when considering whether the Court should order the convening of a meeting of a company’s members (or creditors) under s 411(1) of the Corporations Act as follows (see also, e.g., Amcom Telecommunications Limited, in the matter of Amcom Telecommunications Limited [2015] FCA 341 at [12]):

At the first court hearing, the Court will order the convening of a scheme meeting and approve a draft explanatory statement to be sent to scheme members if it is satisfied of the following matters:

(1)    the plaintiff is a Pt 5.1 body;

(2)     the proposed scheme is a compromise or (relevantly) an arrangement within the meaning of s 411(1) of the Act;

(3)    the scheme booklet will provide proper disclosure to shareholders;

(4)    the scheme is bona fide and properly proposed;

(5)    the Australian Securities and Investments Commission (ASIC) has had a reasonable opportunity to examine the terms of the scheme and the scheme booklet and make submissions to the Court, and has had 14 days’ notice of the date of the first court hearing; and

(6)    the procedural requirements of the Federal Court (Corporations) Rules 2000 (Cth) (Corporations Rules) have been met,

see Orion Telecommunications Ltd, re Orion Telecommunications Ltd [2007] FCA 1389 at [5].

In addition, “the court will not ordinarily summon a meeting unless the scheme is of such a nature and case in such terms that, if it receives the statutory majority at the … meeting the court would be likely to approve it on the hearing of a petition which is unopposed”: F T Eastment & Sons Pty Ltd v Metal Rood Decking Supplies Pty Ltd (1977) 3 ACLR 69 at 72.

13    Insofar as the Court’s discretion to exercise the power under s 411(1) of the Corporations Act once those necessary preconditions have been met is concerned, in SILK Laser Australia Limited, in the matter of SILK Laser Australia Limited [2023] FCA 1191 at [24], Halley J said:

In MOQ [Limited, in the matter of MOQ Limited [2022] FCA 1160] at [12]-[17], I explained that the following principles guided the exercise of the Court’s discretion:

…

(b) At the first court hearing, the Court exercises its supervisory jurisdiction in order to review the scheme and to raise any queries that it might have with the plaintiff: Alstom Signalling Solutions Pty Ltd, in the matter of Alstom Signalling Solutions Pty Ltd v Alstom Transport Australia Pty Limited [2016] FCA 838 at [21] (Gleeson J). The Court needs to be satisfied that there are no obvious flaws in the scheme and that there is an adequate explanation provided to persons who have a financial interest in the proposed scheme: In the matter of Coca-Cola Amatil Limited [2021] NSWSC 270 at [13] (Black J).

(c) The Court should consider at the first court hearing whether the proposed scheme is not inappropriate and whether it is one that sensible business people might consider is of benefit to its members: Australian Leaders Fund Ltd v Equity Trustees Ltd, in the matter of Australian Leaders Fund Ltd [2021] FCA 88 at [15] (Stewart J), citing Re Sonodyne International Ltd (1994) 15 ACSR 494 at 499 (Hayne J); Integra Mining Limited, in the matter of Integra Mining Limited [2012] FCA 1414 at [11] (McKerracher J); and Amcom at [10].

(d) The Court does not need to be satisfied that no better scheme could have been proposed and ultimately, that is a question for the members themselves to determine at the scheme meeting: Associated Advisory Practices Limited, in the matter of Associated Advisory Practices Limited {2013] FCA 761 at [22] (Farrell J); Coca-Cola Amatil at [13]; and Leaders Fund at [15].

(e) Although the second court hearing is when the Court makes its final determination, in practice, the first court hearing is where the Court will typically intervene if it has concerns. A reason advanced for this, is that the market views the approval by the Court of the convening of scheme meetings as providing assurance that the scheme, at least in form and substance, has received a preliminary clearance by the Court and that trading in the company’s securities thereafter will proceed on that basis: Re Archaean Gold NL (1997) 23 ACSR 143 at 147 (Santow J); Leaders Fund at [15].

14    It is well established that the question of 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: see, e.g., Re AWA Mutual Limited [2023] FCA 1551 at [54]; Re Newcrest Mining Limited [2023] FCA 1080 at [30]; Re Oz Minerals Limited [2023] FCA 197 at [15]; Re Carbon Revolution Limited [2023] FCA 1081 at [22].

FORMAL REQUIREMENTS MET

15    I am satisfied that each of the necessary preconditions to the Court’s exercise of power under s 411(1) was established by the evidence upon which NSX relied, namely:

(a)    NSX is registered under the Corporations Act and thus is a “Part 5.1 body”.

(b)    The proposed scheme is an “arrangement” between NSX and the scheme shareholders. Section 411 contemplates a wide class of arrangements that are within the company’s power, not contrary to law and that touch or concern the company’s rights: see, e.g., Re Orion Telecommunications Ltd [2007] FCA 1389 at [5]; Re Staging Connections Group Ltd [2015] FCA 1012 at [19]; Re Silver Lake Resources Limited [2024] NSWSC 631 at [9]. A proposal for the acquisition of the shares in a company in return for consideration being paid to shareholders is plainly such an arrangement.

(c)    There will be proper disclosure of relevant matters to shareholders by the scheme booklet, which contains the prescribed information. The information to be provided to members is regulated by s 412 of the Corporations Act, and reg 5.1.01 and Schedule 8 of the Corporations Regulations 2001 (Cth). There are three essential requirements: see the summary in Viridian Financial Group Ltd, in the matter of Viridian Financial Group Ltd [2025] FCA 997 at [40] (Anderson J). Those requirements are satisfied here.

(d)    The scheme is bona fide and properly proposed. By the scheme implementation deed, NSX has committed itself to propounding the scheme which provides prima facie evidence of this fact: Re ELMO Software Pty Ltd [2023] NSWSC 12 at [18].

(e)    ASIC has been given more than 14 days’ notice of this hearing as required under s 411(2) of the Corporations Act. It has also had a reasonable opportunity to consider the terms of the scheme and the draft scheme booklet, having been provided with drafts on 22 August 2025. At the hearing, a letter from ASIC dated 8 September 2025 was tendered which stated that ASIC did not propose to appear at the hearing.

(f)    An ASIC company search of NSX was conducted on 18 June 2025, being more than 7 days before the Originating Process was filed on 3 July 2025, as required by r 2.4(2) of the Federal Court (Corporations) Rules 2000 (Cth). However, Exhibit MC-2 of the affidavit of Mr Cunningham contains an updated company search conducted on 4 September 2025. The latter search relevantly shows no changes from the search conducted on 18 June 2025. Accordingly, I consider it appropriate to exercise the Court’s power under r 1.3 of Corporations Rules to relieve NSX of the requirement to comply with r 2.4(2).

(g)    The chairperson and the alternate chairperson nominated for the proposed scheme meeting have each confirmed the matters required by rule 3.2(b) of the Corporations Rules.

(h)    The proposed draft orders for the convening of the scheme meeting identify the scheme as required by r 3.3(1) of the Corporations Rules.

(i)    Rule 3.4 of the Corporations Rules sets out certain requirements regarding the form of notice to be published for the hearing of this application pursuant to s 411(4) of the Act. For the second Court hearing in this matter, NSX seeks dispensation from r 3.4 because it proposes to give notice of that hearing by way of an ASX announcement substantially in the form set out in Exhibit MC-2 of Mr Cunningham’s affidavit. I am satisfied that it is appropriate to exercise the Court’s power under r 1.3 of Corporations Rules to relieve NSX of the requirement to comply with r 3.4.

16    Section 852DH of the Corporations Act requires ASIC regulatory approval for CNSX and BidCo to acquire voting power of 100% in the capital of NSX. There is uncertainty as to whether this condition precedent will be satisfied within the timeframe presently contemplated. I am satisfied that this is not a reason not to convene the meeting. There is no compelling reason why ASIC’s inquiry should result in the timetable being put on hold and so delaying the proposed implementation of the scheme: Re Capitol Health Limited [2024] FCA 1120 at [29]-[34].

17    There is otherwise no apparent reason why the scheme should not, in due course, receive the Court’s approval, if the necessary majority of votes are achieved. I note the independent expert’s conclusion that the scheme is fair and reasonable and therefore in the overall best interests of shareholders. In particular, the independent expert concluded that the scheme consideration offered to shareholders exceeds the pre-scheme market value of the shares (by up to $0.01 cent per share for fully paid shares and by up to $0.00010 per share for partly paid shares).

Discretion

18    Consistent with NSX’s ex parte disclosure obligation, counsel drew my attention to the following aspects of the scheme in the course of oral and written submissions. For the reasons outlined below, I am satisfied that none of these matters provide a reason to decline to order the convening of the meeting in relation to the scheme the subject of this application.

Performance risk and funding

19    The scheme places performance obligations on both the bidder, CNSX, and the special purpose vehicle, BidCo. While CNSX has nominated BidCo to pay the scheme consideration, it is CNSX that must provide or procure the scheme consideration. Counsel submitted that this scheme is not therefore an example of one where only the special purpose vehicle has the obligation to pay and fund the scheme consideration. Nevertheless, NSX adduced evidence of both BidCo and CNSX’s obligation and ability to pay the scheme consideration. This information was outlined in s 6.7 of the scheme booklet and was verified as being true and correct on behalf of CNSX by Ms Stern in her affidavit affirmed 7 September 2025.

20    The expected number of scheme shares is 483,618,238, with the expected scheme consideration to be approximately $19,285,392.52. It is intended that BidCo will fund the scheme consideration from the existing cash reserves of CNSX and either the proceeds of a proposed line of credit with Scotiabank or the proceeds of a CAD $10,000,000 guaranteed investment certificate. As at 5 September 2025, the proposed credit facility had not been finalised. If it is not in place before the scheme meeting, CNSX will fund the scheme consideration from its cash reserves and the proceeds of the guaranteed investment certificate (which will mature on 28 November 2025), but this will necessitate moving the implementation date from 24 October 2025 to 28 November 2025. Following recommendations I made during the hearing, the scheme booklet was amended in relevant sections to ensure that this risk of delay was clear to shareholders seeking to understand when they would receive their scheme consideration.

21    On 5 September 2025, CNSX, BidCo and CNSX Global executed a deed poll covenanting in favour of scheme shareholders that, subject to the scheme becoming effective, each will perform all obligations and other actions, including those obligations and actions which relate to the payment of the scheme consideration.

22    I am satisfied that the deed poll, together with the evidence of CNSX’s means to pay and the provision of the scheme consideration to a trust account maintained on behalf the scheme company, are acceptable means of managing any performance risk: ELMO Software Pty Ltd [2023] NSWSC 12 at [27]-[28].

Exclusivity provisions

23    The scheme implementation deed imposes “no existing discussions” warranties and “no-shop”, “no-talk” and “no due diligence” obligations on NSX. CNSX must also be notified by NSX if there is an approach with respect to a competing proposal with CNSX having a “matching right” in respect of any competing proposal. The “no talk” and “no due diligence” obligations are subject to a carve out enabling the directors to comply with their fiduciary obligations.

24    The “exclusivity period” in the scheme implementation deed commences on 19 May 2025 and has a backstop date of nine months, being 19 February 2025. Mr Cunningham gave evidence that the nine month exclusivity period was requested by NSX, in the event there were delays with ASIC's approval under s 852DH of the Corporations Act of CNSX and BidCo's application under s 852DG of the Act to acquire voting power of up to 100% in NSX.

25    I am satisfied that the terms of the exclusivity provisions in the scheme implementation deed are in a conventional form and do not contain anything which would prevent the Court from making the orders convening the scheme meeting. I am satisfied that the nine month backstop period is reasonable and within acceptable timeframes previously considered by the Court, particularly having regard to the carve out provisions in the deed ensuring that directors can comply with their fiduciary obligations: see, e.g., Re Tatts Group Ltd [2017] VSC 552 at [36] (14 months); Re Sirtex Medical Ltd [2018] FCA 1315 at [37] (12 months); Re Trust Co (Re Services) Ltd as responsible entity of VitalHarvest Freehold Trust [2021] NSWSC 108 at [38] to [40] (12 months). I am also satisfied that the exclusivity provisions are adequately disclosed in the scheme booklet so as to ensure that shareholders are able to make an informed decision about the proposed scheme.

Break fee

26    The scheme implementation deed provides that a break fee of $120,000 (inclusive of GST) may be payable by NSX to CNSX in certain circumstances, which do not include a failure by NSX shareholders to vote in favour of the scheme at the scheme meeting. The amount of the break fee is approximately 0.59% of the equity value of NSX, being $20.26 million as at 16 May 2025. As such, the break fee is comfortably under the 1% guideline set out in the Takeover Panel’s Guidance Note 7: Lock Up Devices. I am satisfied that the break fee is not likely to operate coercively when shareholders consider and vote on the scheme, or otherwise deter alternative bidders from making a competing offer: see, e.g., Re APN News Media Ltd [2007] FCA 770 at [43], [52].

Partly paid NSX shares

27    The scheme extends to both fully paid ordinary shares and partly paid ordinary shares. All partly paid shares have a paid-up amount of $0.01 with $0.99 unpaid, being 1% of the aggregate issue price. Mr Cunningham deposed that the partly paid shares in NSX are a historical legacy of NSX and are not listed on the ASX.

28    Under the scheme, the fully paid shareholders will be entitled to $0.04 for each fully paid share and the partly paid shareholders will be entitled to 1% of the scheme consideration for fully paid ordinary shares, being $0.0004 (1% of $0.04). This gives rise to the issue of whether the holders of fully paid shares and partly paid shares constitute separate classes.

29    Ultimately, the question for the Court to determine is whether at the meeting convened for the purpose of obtaining shareholder approval of the scheme, the interests of the two groups of shareholders are so different “as to make it impossible for them to consult together with a view to their common interest”: Sovereign Life Assurance Company v Dodd [1892] 2 QB 573 at 583 per Bowen LJ. The test is not one of identical treatment. It is one of community of interest: Re Hills Motorway Limited [2002] NSWSC 897 at [12]. As Barrett J held in Re Hills at [12]:

The court must ask itself whether the rights and entitlements of the different groups, viewed in the totality of the scheme's context, are so dissimilar as to make it impossible for them to consult together with a view to their common interest. The focus is not on the fact of differentiation but on its effects. The extent and nature of the differentiation must be measured in terms of the effect on the ability to consult together in a common interest or, in other words, the ability to come together in a single meeting and to debate the question of what is good or bad for the constituency as a whole and where the common good lies. Only if the differentiation destroys that ability — the word used by Bowen LJ is “impossible” — does class distinction come to prevail.

30    In considering the question of equal and fair treatment between fully and partly paid shareholders, it is necessary to look at the basis upon which value has been attributed to the fully paid shares and the partly paid shares for the purposes of the scheme. During the hearing, I queried the basis for concluding that because the partly paid shareholders were paid up by $0.01 out $1.00, those shares are considered to be worth one-hundredth of the value of the fully paid shares (in that such an approach seemed to leave out of account the $0.99 liability attaching to each partly paid share). In many schemes involving payment for partly paid shares, a standard approach for ensuring that holders of partly paid ordinary shares are treated equally with holders of fully paid ordinary shares is that the partly paid shareholders receive the same amount as fully paid shareholders, less the unpaid amount: see e.g., Wattyl Limited, in the matter of Wattyl Limited ABN 46 008 412 173 [2010] FCA 854 at [11]-[13]. But that is not the approach being adopted here.

31    During the hearing, NSX tendered an exhibit of what was described as a pro forma share certificate issued to partly paid shareholders. This certificate stated the partly paid shares could only be called up with the consent of the partly paid shareholder, save in the liquidation of NSX. While this document was described as a pro forma certificate, I am satisfied that it constitutes the best evidence of the terms upon which the partly paid shares were issued.

32    Counsel for NSX contended that the methodology described above for ensuring equality between the partly and fully paid shareholders was not applicable here because the unpaid amounts on the partly paid shares could not be called upon by NSX without the consent of the shareholder. It was submitted rather that this case was on all fours with the circumstances in Re Atlantic Gold NL [2014] FCA 697. Re Atlantic concerned a no liability company, in which partly paid shareholders are able to disclaim their shares if they do not wish to pay any unpaid amounts on a call. In that case, an independent expert placed a nil value on the partly paid shares. The partly paid shareholders were paid up to nine-twentieths of their share but it was proposed that they receive 10% of the scheme consideration payable to the holders of the fully paid shares. 

33    I do not agree that the circumstances of this case are comparable to a no liability company, not least because here, the partly paid shareholders are still liable for the unpaid amounts in the event of a liquidation. Notwithstanding this difference, however, I am satisfied that the partly paid shareholders will receive scheme consideration that bears sufficient proportionality to the amount paid up on each of their partly paid shares, having regard to the fact that the circumstances in which the unpaid amount can be called up are limited.

34    The issue for both groups of shareholders is the same, namely whether they accept a price that ascribes a certain price to their shares on a basis that is proportionate to the value which each shareholder has in the shares: Wattyl at [17]. I am satisfied that although the outcome is not one of “identical treatment”, the respective value ascribed to each fully paid and partly paid share is fair and proportionate to the value relativities of the type of shareholding.

35    Moreover the difference between the two groups does not result in an “impossibility” for them to consult together with a view to their common interest. It is true that the holders of the partly paid shares would appear to obtain a very minor windfall if the scheme is approved but this does not mean that the requisite community of interest is lost. This is not least because: (a) any element of preferred treatment is de minimis given the aggregate amount being paid to the holders of partly paid shares in the context of the amount being paid to the holders of fully paid shares under the scheme; and (b) the fully paid shareholders are not receiving less per share by reason of the amounts being paid to the partly paid shareholders under the scheme. In my view, both groups should be able to consult together on the essential matters raised for consideration at the scheme meeting.

36    In drawing these conclusions, I am mindful of the fact that schemes of arrangement are propounded in a business context and that “a practical businesslike approach” should be adopted to the issue of separate classes: Re Opes Prime Stockbroking Ltd (2009) 179 FCR 20; [2009] FCA 813 at [66].

37    In this regard, a critical factor here is also the fact that the partly paid shareholders hold a very small fraction of the number of issued shares and the total scheme consideration which would pass to them is $600. Counsel for NSX correctly submitted that this was de minimis, particularly when considered as a proportion of the total scheme consideration of $19,285,392.52. It seems to me that such a small amount should not be permitted give rise to a fracturing of the class and the attendant risks that would create for the scheme. Courts should take a cautious approach in separating classes and only do so in clear cases: Viridian Financial Group Ltd, in the matter of Viridian Financial Group Ltd [2025] FCA 997 at [61]. I am satisfied that this is not such a case.

38    Another issue for consideration on this topic is the proportion of voting rights accorded to the partly paid shareholders at the scheme meeting. I am satisfied that it is appropriate for those voting rights to be one one-hundredth of a vote for each partly paid ordinary share which is proportionate to the amount paid up on those shares. This accords with the voting entitlements of the partly paid shareholders under NSX’s constitution. As Anderson J stated Re Viridian Financial Group Ltd at [67]:

Courts have accepted that, in the case of voting rights of holders of partly paid shares who are in the same class of members as holders of fully paid shares, it is appropriate to follow the scheme company's constitution and for the voting rights of the holders of partly paid shares to be proportionate to the amounts paid up on their shares.

NSX options and performance rights

39    In order to give effect to the scheme, it has been necessary for NSX to put in place arrangements to deal with existing options and performance rights.

40    In relation to its options, NSX has entered into an option cancellation deed with the sole option holder, Overseas Pension and Benefits Limited, which holds 7,500,000 NSX options. The option holder is not a NSX shareholder or director. The deed provides for the cancellation of the options in return for consideration of $20,000 or approximately $0.00267 per option. NSX applied for and was granted a waiver by ASIC of ASX Listing rule 6.23.2 allowing for the cancellation of the options without the approval of NSX’s shareholders. The deed is otherwise conditional on the scheme being approved by NSX shareholders.

41    I am satisfied that the above matters have been adequately disclosed in the scheme booklet and do not raise any issues that would prevent the Court from making the orders convening the scheme meeting.

42    In relation to performance rights, NSX operates an incentive program under which NSX performance rights have been offered to certain employees and executives. No directors of NSX hold any performance rights. As at 7 September 2025, there were 3,108,889 unvested NSX performance rights on issue.

43    Under the performance rights plan that governs the NSX performance rights, all performance rights automatically vest in the event of, inter alia:

a Court ordering a meeting to be held in relation to a proposed compromise or arrangement for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with any other company or companies and the SecurityHolders [sic] of the Company approve the proposed compromise or arrangement at such meeting […]

44    The effect of this provision is that the vesting will not occur prior to the scheme meeting, and the holders of the unvested rights will not be able to vote in respect of the scheme unless they otherwise have a right to do so. Once the scheme is approved by the shareholders, one fully-paid NSX share will be issued to a holder of the NSX performance right for each NSX performance right held. These issued NSX shares will be able to participate in the scheme.

45    This matter also does not give rise to any reason not to convene the scheme meeting: Re A2B Australia Limited [2024] NSWSC 185 at [13].

46    In respect of Mr Cunningham, he is currently entitled to be issued NSX performance rights but otherwise does not currently hold any shares in NSX. Instead of being issued with the performance rights, Mr Cunningham has entered into a new employment agreement with NSX pursuant to which, subject to the scheme becoming effective: (a) he will be issued with shares in CNSX Global; (b) he will receive a “signing bonus” in the form of further shares in CNSX Global; (c) he will receive a remuneration package of $500,000 plus superannuation contributions; and (d) he will be eligible to participate in the annual incentive plan adopted by the CNSX group.

47    I am satisfied that the matters concerning Mr. Cunningham’s new employment agreement do not give rise to any issues regarding class creation or raise any concerns for the convening of the meeting. I am also satisfied that these matters have been properly disclosed in the scheme booklet.

Restructured finance agreement

48    In July 2024 and January 2025, NSX entered into two convertible loan deeds with ISX Financial EU Plc in relation to the financing of $3,800,000 million. ISXFEU is NSX's largest shareholder and holds 138,915,218 shares in NSX and voting power of 27.595%.

49    On 4 August 2025, after the entry into the scheme implementation deed, NSX announced to the ASX the entry into a new facility agreement with ISXFEU.

50    The facility agreement restructured the existing convertible loan deed facilities between ISXFEU and NSX such that, effective on the implementation date for the scheme, inter alia:

(a)    the convertible loan deed facilities will be replaced by the facility agreement such that the facility agreement will apply to the funds originally advanced to NSX under the original facilities;

(b)    ISXFEU's right to convert the loans under the original facilities into NSX shares will cease;

(c)    the term of each original loan is extended by an additional 12-month period from their current expiry dates;

(d)    the loans may only be used for working capital of NSX or as otherwise approved by ISXFEU;

(e)    the loans are subject to an increased interest rate of 18% per annum;

(f)    'Review Events' are included, which if triggered, would entitle ISXFEU to, amongst other matters, review and renegotiate alternate performance criteria or otherwise cancel its commitment and accelerate NSX's obligation to pay the various fees, interest and amounts made available or payable under the facility agreement; and

(g)    amounts would become payable by NSX to ISXFEU as disclosed in the scheme booklet (and set out below).

51    NSX provided the following description of the amounts referred to (g) above and a description as to what they relate to assuming an implementation date of 24 October 2025.

52    The key issue is whether a net collateral benefit accrues to ISXFEU as a shareholder as a result of the new facility agreement; and, if so, as to whether the terms of the agreement are such as to create a separate class of NSX shareholders for the purpose of convening separate scheme meetings.

53    In David Jones Ltd, in the matter of David Jones Ltd (No 3) [2014] FCA 753, Farrell J confirmed at [15] that the appropriate measure of whether a benefit exists is the “net benefits” test which her Honour described as follows:

In the context of a scheme, I accept that the appropriate measure of whether a benefit exists is the ‘net benefits’ test which has been adopted by the Takeovers Panel in Guidance Note 21: Collateral Benefits (GN 21) at [15] and [31] in determining whether ‘unacceptable circumstances’ exist by reason of the existence of such an interest. This test was posited by Santow J in Boral Energy Resources Ltd v TU Australia (Queensland) Pty Ltd (1998) 43 NSWLR 638 at 680:

The preferred holistic view instead takes into account whatever rights or benefits are conferred by each transaction, to be netted off against whatever rights or benefits are thereby given up, to the extent such benefits are commensurable at least in an approximate sense. The resultant net benefit is to be compared under each transaction. Only if there is overall disparity in favour of the party to the non-bid transaction is s 698(1) [now s 623] contravened. This is in the sense of a balance of advantage, profit or good in favour of the party to the nonbid transaction.

54    For the following reasons, I am satisfied that the new agreement does not give rise to a net collateral benefit to ISXFEU and does not therefore entail the need for separate scheme meetings.

(a)    The evidence establishes that while there is a pre-existing relationship between ISXFEU and NSX, there were no pre-existing relationships between ISXFEU and CNSX, the latter relationship being the one of concern as the new facility agreement only applies if the scheme proceeds and CNSX controls NSX. I am satisfied that the parties were dealing at arms-length.

(b)    The independent expert report compared what ISXFEU may receive under the new facility agreement with what it could have received under the original terms if they had converted pre-scheme and concluded that there is no collateral net benefit to ISXFEU. I am satisfied with this analysis having regard to the following:

(i)    The amount of approximately $4.1m for principal and interest up to the implementation date of 24 October 2025 is unchanged from ISXFEU’s rights prior to the scheme proposal.

(ii)    The restructure fee of approximately $2.5m for ISXFEU foregoing its conversion right from 2.5c to 4.0c is reasonable as it meets the principle of equality in that if ISXFEU had converted pre-scheme, it would receive the same price as all other shareholders.

(iii)    A higher rate of 18% (previously 8%-10%) is reasonable in the absence of conversion rights. The expert report noted that interest rates well in excess of 14% are common for companies in financial distress such as NSX.

(iv)    The establishment and legal fees are reasonable representing approximately 3% each of the base loan values of $4.1m. The expert report opined that it is not unusual for private credit lenders to charge such fees in complex debt restructures.

(v)    The expert report notes that early repayment fees are common in private credit arrangements. In this case, the report opines that the fee could reasonably be characterised as compensation for giving up the residual conversion right above 4.0c per share for the remainder of the debt facility’s original term. The report calculates a theoretical value of the residual conversion right given up by ISXFEU to be $1.4m, an amount which is more than the potential early repayment fee. Even if this value was overly generous, the report concludes that a probable mid-case value of $0.7m would not lead to a conclusion that the early repayment fee is unreasonable or does not reflect a fair value. It should also be borne in mind that the early repayment fee declines over time and does not otherwise crystallise unless CNSX repays ISXFEU early, of which there is no evidence of its intention to do so.

55    On this basis, I accept the conclusion of the independent expert that, whilst there is a benefit to ISXFEU as a debt provider, there is no material collateral net benefit arising to ISXFEU as a shareholder. This matter has been fully disclosed in the scheme booklet. I am satisfied that it is appropriate for ISXFEU to vote with all other shareholders on the scheme.

Bidder financial support

56    When the parties entered into the scheme implementation deed, CNSX provided NSX with an executed deed poll providing an unsecured drawdown facility in favour of NSX of up to $1 million. Mr Cunningham deposed that, in the absence of CNSX providing the support facility, NSX might experience financial difficulty by September 2025 and would otherwise be required to raise capital or obtain third party debt funding, each of which options are prohibited by the terms of the scheme implementation deed.

57    The question for consideration is whether a loan of this nature, that is, a loan from the acquirer under a scheme to the target, is a lock up device in that it prevents free consideration of the proposed scheme by members: Re Nzuri Copper Ltd [2019] WASC 189 at [67]-[68]; Re Anatolia Energy Ltd [2015] FCA 1134 at [44]-[45].

58    I am satisfied that is not the case for at least the following reasons: (a) the interest rate payable to CNSX (the Reserve Bank of Australia cash rate target plus 4% per annum) is on favourable terms; (b) the facility provides NSX with a reasonable 90-day period to refinance in the event that the scheme is voted down by NSX shareholders: Re Talon Energy Ltd [2023] FCA 1362; and NSX is not obliged or penalised for not availing itself of the finance offered under the facility.

Shareholder communication

59    Shareholder communications will take the form of sending reminder to vote communications to members, the establishment of an inbound information line to answer shareholders’ queries, an outbound call campaign in respect of the top 50 shareholders, and the establishment of a website to access the scheme booklet and information regarding the scheme. NSX also proposes to make a series of ASX announcements relating to the outcome of the first Court hearing, the registration and dispatch of the scheme booklet, the receipt of certain regulatory approvals, and publishing the Chair’s address prior to the scheme meeting.

60    ASIC provided NSX with comments in respect of its proposed scripts for shareholder communications. A marked-up copy showing ASIC’s proposed amendments to the scripts was tendered at the hearing.

61    NSX made clear that it was not seeking approval of the proposed shareholder scripts. Nonetheless, it acknowledged that, at the time of seeking an order for approval of a scheme, the Court will need to be informed about any relevant matters that have arisen from the way communications have occurred in the period leading up to the meeting: Diverger Limited, in the matter of Diverger Limited [2023] FCA 1614 at [22].

62    Overall, I am satisfied that shareholders would be provided with adequate information, and that appropriate arrangements have been made to dispatch the scheme materials, and to deal with follow up communications.

CONCLUSION

63    For the foregoing reasons I am satisfied that the proposed scheme of arrangement is of such a nature, and cast in such terms, that, if it achieves the statutory majorities at the scheme meeting, the Court would be likely to approve it. Accordingly, I will make the orders sought by the plaintiff to convene the scheme meeting.

Associate:

Dated: 15 September 2025