Federal Court of Australia

Freeman, in the matter of Regional Express Holdings Ltd (subject to deed of company arrangement) (No 7) [2025] FCA 1598

ORDERS

THE COURT ORDERS THAT:

1. Pursuant to s 444GA(1)(b) of the Corporations Act 2001 (Cth), the first plaintiffs (Deed Administrators) have leave to transfer all of the existing shares (Shares) in the capital of Regional Express Holdings Limited (Subject to Deed of Company Arrangement) (Company) from the members (as defined in the Corporations Act) of the Company to Air T Rex Acquisition Inc (Air T), in accordance with cl 8.5(f) of the deed of company arrangement dated 14 November 2025 entered into by, amongst others, the Deed Administrators, Air T Inc and the Company (DOCA).

2. Pursuant to s 447A(1) of the Corporations Act and s 90-15(1) of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Corporations Act (IPSC), any of the Deed Administrators may, jointly or severally, in their capacity as Deed Administrators of the Company:

(a) execute share transfer forms and any other documents ancillary or incidental to effecting the transfer of the Shares referred to in order 1 above; and

(b) enter or procure the entry of the name of Air T into the share register of the Company in respect of all Shares transferred to Air T in accordance with order 1 above.

3. To the extent necessary, pursuant to s 447A(1) of the Corporations Act and s 90-15(1) of the IPSC:

(a) Part 5.3A of the Corporations Act is to operate in relation to the Company as if:

(i) the reference to the word “shares” in s 444GA(1) of the Corporations Act includes:

(A) all vested or unvested, exercised or unexercised, share options, warrants or shares in the Company offered pursuant to a Gift Offer (as that term is defined in the affidavit of Samuel John Freeman affirmed 19 November 2025 (Freeman Affidavit)); and

(B) other instruments convertible into securities in the Company, including any shares or options the Instrument Beneficiaries (as that term is defined in the Freeman Affidavit) are entitled to,

(together, the Options); and

(ii) the reference to the phrase “members of the company” in s 444GA(3) of the Corporations Act includes the holders of the Options; and

(b) the Deed Administrators be granted leave to transfer all of the existing Options from the holders of the Options to Air T, in accordance with cl 8.5(f) of the DOCA.

4. Pursuant to s 447A(1) of the Corporations Act and s 90-15(1) of the IPSC, any of the Deed Administrators may, jointly or severally, in their capacity as Deed Administrators of the Company:

(a) execute share transfer forms and any other documents ancillary or incidental to effecting the transfer of the Options referred to in order 3 above; and

(b) enter or procure the entry of the name of Air T into the share register of the Company in respect of all Options transferred to Air T in accordance with order 3 above.

5. To the extent necessary, pursuant to s 477(2B) of the Corporations Act, approval be granted to the joint and several liquidators of the sixth plaintiff (Rex Airlines) to enter into and perform (and cause Rex Airlines to enter into and perform) the CFA Initial Amendment Agreement (as that term is defined in the Freeman Affidavit) in substantively the form of the agreement exhibited to the Freeman Affidavit.

6. The plaintiffs’ costs:

(a) of and incidental to the relief in orders 1-4 above be costs and expenses in the deed administration of the Company; and

(b) of and incidental to the relief in order 5 above be costs and expenses in the liquidation of Rex Airlines.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1 All going well, this judgment should be the last in the long line of judgments dealing with the administration of companies associated with Regional Express Holdings Ltd (Rex Holdings, and together, the Rex Group) that operate the important regional airline business known as Rex Airlines. It deals with the Court’s approval of the transfer of the shares in Rex Holdings to the nominee of the proponent of a deed of company arrangement (DOCA) that has been approved by creditors, and associated relief.

2 The first plaintiffs are Samuel Freeman, Justin Walsh and Adam Nikitins of the Turnaround and Restructuring Strategy division of the professional services firm that trades as Ernst & Young Australia. They were formerly the voluntary administrators of nine companies in the group, and they were later the deed administrators in relation to eight of those companies and the liquidators of one of them. Except where it is necessary to differentiate between their different roles, I refer below to the first plaintiffs simply as the administrators.

3 On 30 July 2024, the administrators were initially appointed pursuant to resolutions under s 436A of the Corporations Act 2001 (Cth) as administrators of the following Rex Group companies:

(1) Rex Holdings, the second plaintiff;

(2) Air Partners Pty Ltd, the third plaintiff and a wholly owned subsidiary of Rex Holdings;

(3) Rex Investment Holdings Pty Ltd (RIH), the fourth plaintiff and a wholly owned subsidiary of Rex Holdings;

(4) Regional Express Pty Ltd, the fifth plaintiff and a wholly owned subsidiary of Rex Holdings; and

(5) Rex Airlines Pty Ltd (Rex Airlines), the sixth plaintiff and a wholly owned subsidiary of Regional Express Pty Ltd.

4 Rex Airlines was placed into liquidation on 11 November 2025 by resolution of its creditors.

5 On 20 October 2025, the same administrators were appointed pursuant to resolutions under s 436A of the Corporations Act as administrators of four additional subsidiaries in the Rex Group:

(1) Rex Flyer Pty Ltd, being a wholly owned subsidiary of Air Partners Pty Ltd;

(2) Australian Aero Propeller Maintenance Pty Ltd, being a wholly owned subsidiary of RIH;

(3) Australian Airline Pilot Academy Pty Ltd, being a wholly owned subsidiary of RIH; and

(4) AAPA Victoria Pty Ltd, being a wholly owned subsidiary of RIH.

6 Rex Holdings is the parent company of the Rex Group. Its securities were listed on the Australian Securities Exchange (ASX), although the listing was suspended following the commencement of the administration. The securities of Rex Holdings have now been removed from quotation on the ASX. The Rex Group companies operate an airline in the Australian domestic passenger and freight industry, with a focus on servicing regional locations by the operation of flights to and from regional or rural airports throughout Australia. This is referred to as the “regional business”. It has operated for more than 20 years. The Rex Group owns and operates the world’s largest fleet of twin-engine turboprop Saab 340B / B+’s.

7 Prior to the administration of the initial Rex companies, Rex Airlines provided domestic route services between major cities (ie the “metropolitan business”) utilising Boeing 737 aircraft. Services on those routes were discontinued when the administrators were appointed.

8 On 11 December 2025, I made orders to give effect to a DOCA concluded between the administrators, the companies in administration and the proponent of the DOCA, namely Air T Inc. Following execution of the DOCA on 14 November 2025, the administrators became the deed administrators. The orders included:

(1) that the deed administrators of Rex Holdings be granted leave pursuant to s 444GA of the Corporations Act to transfer all of the existing shares in the capital of Rex Holdings from the current members of Rex Holdings to Air T Rex Acquisition Inc (Air T Rex) in accordance with the DOCA;

(2) to the extent necessary, that Pt 5.3A of the Corporations Act operate in relation to Rex Holdings such that:

(a) the word “shares” in s 444GA of the Corporations Act includes all vested or unvested, exercised or unexercised, share options, warrants or shares in Rex Holdings offered pursuant to an employee Gift Offer (as detailed below) and other instruments convertible into securities in Rex Holdings, including any shares or options to which the Instrument Beneficiaries (also as detailed below) are entitled; and

(b) the words “members of the company” in s 444GA(3) include the holders of such options; and

that the deed administrators also be granted leave to transfer the options to Air T Rex;

(3) ancillary machinery orders pursuant to s 447A of the Corporations Act that the deed administrators may execute share transfer forms and other incidental documents to give effect to the transfer of the shares and options and to effect the entry of the name of Air T Rex into the share registry of Rex Holdings in respect of the transferred shares; and

(4) orders granting approval under s 477(2B) of the Corporations Act to the liquidators of Rex Airlines to enter into (and cause Rex Airlines to enter into) an agreement described as the CFA Initial Amendment Agreement (which may, on one view, be necessary as certain obligations under that agreement could arguably be said to persist for more than three months).

9 My reasons for making those orders follow below.

10 I acknowledge the clear and efficient way in which the case was presented by solicitors and counsel for the plaintiffs, including in the written submissions. I have drawn heavily from those submissions in summarising the relevant facts and the key issues.

Relevant background

11 In August 2024, the administrators commenced a competitive process for the recapitalisation of the business or the sale of the assets of the Rex Group. The administrators retained investment bank Houlihan Lokey to assist them in conducting the sale process.

12 That sale process did not result in a sale of the regional business. The administrators did not receive any binding proposal for the sale of the regional business that was credible or otherwise capable of acceptance for its sale and purchase. The sale process did, however, result in the sale of various other assets, including an aeromedical business carried on by one of the subsidiaries in the Rex Group, the shares in another of the subsidiaries which conducted a fly-in-fly-out charter business, and certain real property.

13 In the same process, the administrators received feedback from prospective bidders from which some lessons were learnt. In particular, it was learnt that there was an immediate need for significant capital expenditure to increase the number of “serviceable aircraft”, certain routes were not financially sustainable, and there were challenges in undertaking fleet renewal due to the age of the Rex Group’s Saab 340 aircraft (the production of which had ceased about 25 years earlier).

14 The administrators then caused the Rex Group companies to obtain further funding from the Commonwealth of Australia to invest in improving the assets and operations of the regional business with a view to undertaking a business improvement strategy and then a further sale process.

15 In February 2025, following the implementation of that business improvement strategy, the administrators commenced a second process for the sale or recapitalisation of the regional business. The administrators again retained Houlihan Lokey to assist them in conducting the sale process.

The Air T Inc transaction and the DOCA proposal

16 On 21 October 2025, the second sale process culminated in the administrators, together with the companies in the Rex Group other than Rex Airlines, entering into a Sale and Implementation Deed with Air T Inc to give effect to the transaction. The Implementation Deed included Air T Inc making a DOCA proposal for the Rex Group companies in administration other than Rex Airlines. No proposal was received in relation to Rex Airlines, presumably because following the cessation of the metropolitan business that company had no operations. The companies in respect of which the DOCA proposal was made will be referred to below as the DOCA companies.

17 Pursuant to the terms of the Implementation Deed, the administrators continued to trade the regional business in the ordinary course while the Air T transaction was being finalised through the entry into and completion of the DOCA.

18 On 3 November 2025, the administrators issued their second report to creditors pursuant to s 75-225 of the Insolvency Practice Rules (Corporations) 2016 (Cth) and convened the second meetings of creditors for the Rex Group companies. The meetings were held concurrently on 11 November 2025. The administrators recommended that the creditors of the companies vote in favour of the DOCA proposal as they were of the view that the DOCA was in the best interests of the companies.

19 The effect of the DOCA is, in summary, the following.

20 The entire issued capital in Rex Holdings is to be transferred to Air T Rex (as the nominee of Air T Inc). The share transfer is subject to the administrators obtaining orders granting them leave to give effect to the transfer under s 444GA of the Corporations Act (as sought in the application before me), an exemption being granted by the Australian Securities and Investments Commission from the application of Ch 6 of the Corporations Act, and various other completion conditions in cl 3.1 of the DOCA.

21 A Creditors’ Trust will be established whereby, upon implementation of the DOCA, the claims of creditors against the DOCA companies (except for certain preserved claims) will transfer to, and become claims against, the Creditors’ Trust with the administrators to become the trustees of the Creditors’ Trust.

22 The consideration to be paid or otherwise provided by Air T Inc is a combination of cash payments (to the Creditors’ Trust) and the assumption of various liabilities, ie claims which the DOCA companies will remain liable to meet after completion of the DOCA. In that regard, Air T Inc will make cash contributions to be paid to and distributed through the Creditors’ Trust of an amount necessary to pay the priority entitlements of employees whose employment by the Rex group was previously terminated, estimated as about $2,400,000 (Employee Contribution). Air T Inc will also contribute an amount representing certain cash and receivables assets which are to be retained by the DOCA companies less allowable deductions for debt-like items including prepaid tickets for flights scheduled after completion, up to an amount of $18,000,000 (Agreed Assets Contribution).

23 There is a further amount representing trading and related expenses incurred by the administrators and unpaid at completion of the DOCA less the amount of the Agreed Assets Contribution (described as an Expense Cash Contribution) plus an amount of $3,825,000 (described as a Costs Cash Contribution), which will be paid to the Creditors’ Trust on completion by the administrators from the DOCA companies’ cash at bank on completion.

24 Air T Inc will assume the Commonwealth’s secured debt on restructured terms agreed between them, estimated in the s 75-225 report as about $140,000,000 at present, all employee entitlement liabilities of employees continuing employment with the DOCA companies, estimated as about $12,000,000, and certain debts due to critical suppliers of the regional business, estimated in the s 75-225 report as less than $500,000.

25 The assets held by the Creditors’ Trust will be distributed in three “pools” as follows:

(1) an “Employee Pool” through which the Employee Contribution will be applied for the benefit of the non-continuing employees’ priority claims (with any surplus to be applied to the General Pool referred to below);

(2) an “Agreed Assets Pool” through which the Agreed Assets Contribution and the Expense Cash Contribution together will be applied to discharge in full expenses of the DOCA companies that were incurred pre-implementation of the DOCA (with any surplus returned to Rex Holdings); and

(3) a “General Pool” to be used to discharge the remuneration and costs of the administrators (as voluntary administrators, deed administrators and trustees of the Creditors’ Trust), with any surplus then applied towards the Commonwealth on account of its secured claim, the priority creditors and then unsecured creditors (noting that the administrators do not expect any distribution to ordinary unsecured creditors).

26 The DOCA provides ongoing employment for the continuing employees of the DOCA companies, ongoing trading with suppliers and the continuation of the regional business, enabling it to continue to offer passenger flights and serve its regional customers. Following implementation of the DOCA, Air T Inc (through Air T Rex) will assume control of the DOCA companies and continue to trade the DOCA companies as a going concern.

27 As mentioned, it is not anticipated there will be any return to ordinary unsecured creditors of the Rex Group, other than creditors of the subsidiaries which went into administration in October 2025 and whose debts are nominal. The DOCA will, however, result in a continuing business relationship for many unsecured creditors. Shareholders will receive no payment from the Creditors’ Trust and no other payment in return for the transfer of their shares to Air T Rex.

28 The administrators recommended to creditors that they vote in favour of the DOCA at the s 439A second meeting of creditors. The administrators expressed the following opinions.

29 First, the DOCA provides a return to the Commonwealth (as the secured creditor) which exceeds that which would likely be achieved in circumstances where the DOCA companies are wound up (essentially by the rolling over of the Commonwealth’s debt as part of an arrangement to which the Commonwealth has expressly agreed).

30 Secondly, the DOCA allows the DOCA companies to continue to operate the regional business.

31 Thirdly, the DOCA provides a return to employee creditors whose employment has ceased which significantly exceeds that which is likely to be achieved in circumstances where the DOCA companies are wound up (which, in practical terms, is a benefit that will accrue to the Commonwealth administering the Fair Entitlements Guarantee Scheme).

32 Fourthly, for continuing employees, the DOCA provides the benefit of a continued employment relationship with the DOCA companies and, as a result, it is in the interests of the employee creditors for the DOCA to be given effect.

33 Finally, although the DOCA generally provides no return to ordinary unsecured creditors, that nil return is the same as that likely to be achieved if the DOCA companies are wound up. Also, many of the unsecured creditors would at least have the opportunity to benefit from a continued business relationship with the DOCA companies should the DOCA be accepted.

Approval of the DOCA by creditors

34 As mentioned, on 11 November 2025 the s 439A second meetings of creditors were held. They were convened and held concurrently in all the Rex Group companies that were in administration.

35 The creditors of the DOCA companies overwhelmingly endorsed and voted in favour of the DOCA proposal. With respect to Rex Holdings, of the creditors voting on the resolution, 95.34% by number and 86.25% by value voted in favour. With respect to the creditors of Regional Express Pty Ltd, 75% by number and 99.36% by value voted in favour. The creditors of each of the other DOCA companies voted unanimously in favour.

36 On 14 November 2025, the DOCA was executed by the administrators, Air T Inc and the DOCA companies.

Completion of the DOCA restructure

37 As explained above, completion of the restructure of the DOCA companies in accordance with the DOCA requires that the administrators transfer the shares in Rex Holdings to Air T Rex.  A condition precedent to completion of the DOCA is that the administrators of Rex Holdings obtain the leave of the Court under s 444GA of the Corporations Act to transfer the shares.

38 Further, because Rex Holdings is a public company with more than 50 members, it is subject to the takeover prohibitions in s 606 of the Corporations Act. The administrators are proceeding on the basis that it would be unlawful for Air T Rex to acquire more than 20 percent of the issued share capital of Rex Holdings without complying with Ch 6 of the Corporations Act. As none of the exemptions in s 611 applies, ASIC relief from the takeover provisions in Ch 6 under s 655A(1)(a) is required to enable the share transfer contemplated by the DOCA.

39 On 3 November 2025, the administrators applied to ASIC seeking Ch 6 relief. As at the date of the hearing, ASIC had only made an “in-principle” decision to provide that relief. That is, although ASIC has evinced an intention to grant the relief sought by the administrators, its decision will not take effect until a formal instrument of relief is executed. ASIC’s position is that this execution is conditional on the Court making the orders sought by the administrators. This is in accordance with ASIC’s usual practice apparently being to await court approval of the transfer under s 444GA(1)(b) before granting relief from Ch 6: Strawbridge, in the matter of Virgin Australia Holdings Ltd (administrators appointed) (No 9) [2020] FCA 1652;148 ACSR 648 at [21] per Middleton J.

40 On satisfaction of the various conditions precedent under the DOCA, the completion steps under cl 8 of the DOCA must be undertaken including the establishment of the Creditors’ Trust and the DOCA consideration will be provided (including the assumption of the liabilities described above, and the payment of the Employee Contribution and the Agreed Asset Contribution).

The alternative to the DOCA restructure

41 If the share transfer does not proceed then completion of the restructure and implementation of the DOCA will not proceed. In that event, liquidation of Rex Holdings is inevitable given the very substantial deficiency of its assets in comparison to both its secured and unsecured debt. That is the view expressed in the report of the independent experts, Joanne Lupton and Peter Gothard of KPMG Corporate Finance, a division of KPMG Financial Advisory Services (Australia) Pty Ltd. They say that in the absence of a successful recapitalisation of the business, Rex Holdings is expected to be placed in liquidation and cease trading because of the need for a substantial injection of fresh capital (and, as the plaintiffs further note, the expiry of the Commonwealth’s funding). I accept that view.

42 If the DOCA companies are wound up, the returns to creditors estimated by the administrators as compared to the outcome under the DOCA are likely to be as follows:

(1) The Commonwealth, as secured creditor, would receive between 35c and 65c in the dollar, whereas under the DOCA its debt would remain payable by the DOCA companies under agreed restructured terms with Air T Inc.

(2) Priority employee creditors whose employment would continue under the DOCA would receive between 10c and 11c in the dollar, whereas under the DOCA their entitlements as continuing employees would remain payable by the relevant DOCA company.

(3) Priority employee creditors whose employment was terminated would receive between 10c and 11c in the dollar, whereas under the DOCA they stand to receive 100c in the dollar.

(4) Ordinary unsecured creditors would receive a nil return in either scenario.

43 The administrators estimate that, in the event of a liquidation, there would be additional redundancy claims in respect of the employees who would otherwise be continuing employees under the DOCA, the quantum of which is estimated to be between $37,000,000 and $40,000,000.

44 In neither scenario is there expected to be any return to the shareholders of Rex Holdings. The same conclusion is expressed in the independent experts’ report. The ultimate opinion of Ms Lupton and Mr Gothard is that there is no residual equity value for the shareholders of Rex Holdings.

Applicable principles

45 Section 444GA(1)(b) of the Corporations Act permits a deed administrator to transfer shares in a company if the deed administrator has obtained leave of the Court.

46 The critical issue is the Court’s assessment of whether or not the share transfer brings about any “unfair prejudice” to the members of the company: s 444GA(3).

47 The applicable principles are well settled, having been expressed and applied in countless cases.

48 Whether a transfer is unfairly prejudicial is to be determined having regard to all the circumstances of the case and the policy of the legislation: Re Habibi Waverton Pty Ltd (in liq) (admin apptd) [2021] NSWSC 1443; 154 ACSR 701 at [31] per Rees J. As recently emphasised in Fitzroy River Limited Liability Company v Tucker as joint and several administrator of Yeeda Pastoral Company Pty Ltd (Subject to Deed of Company Arrangement) [2025] WASCA 118 at [13] per Mitchell and Vaughan JJA and Musikanth J:

(1) again, the key consideration and starting point posed by s 444GA(3) is that the Court must be satisfied that the proposed transfer would not unfairly prejudice the interests of members of the company;

(2) assuming that the Court is so satisfied, there is a residual discretion as to whether to grant leave to a deed administrator to transfer shares in the company; and

(3) the discretion must be exercised having due regard to the object of Pt 5.3A of the Corporations Act, as set out in s 435A.

49 The requirement that the transfer not unfairly prejudice shareholders is intended to direct the Court to consider the impact of a compulsory sale on shareholders where there may be some residual value in the company: Explanatory Memorandum to the Corporations Amendment (Insolvency) Bill 2007 (Cth) at [7.58]; Re Tucker (as deed administrator of Black Oak Minerals Ltd (subject to deed of company arrangement) (in liq)) [2019] FCA 293; 134 ACSR 472 at [32] per Banks-Smith J.

50 Unfairness only arises if prejudice is established. As Martin CJ observed in Weaver v Noble Resources Ltd [2010] WASC 182; 41 WAR 301 at [79], “[i]f the shares have no value, if the company has no residual value to the members and if the members would be unlikely to receive any distribution in the event of a liquidation, and if liquidation is the only alternative to the transfer proposed, then it is difficult to see how members could in those circumstances suffer any prejudice”: cited with approval in Kipoi Holdings Mauritius v Kirman and Brauer (as joint and several administrators of Tiger Resources Ltd (subject to deed of company arrangement) (No 4) [2024] WASCA 145 at [288] per Vaughan JA, Buss P and Mitchell JA agreeing.

51 Thus, as a general proposition, if liquidation is the only realistic alternative to a proposed transfer of the shares, and the shares would have no value in a liquidation, then there is no unfair prejudice to the interests of members if leave is given pursuant to s 444GA(1)(b) of the Corporations Act: In the matter of OrotonGroup Ltd (subject to deed of company arrangement) [2018] NSWSC 1213 at [37] per White J and the cases cited there.

52 Even where some bare prejudice arising from the transfer of shares can be established, that necessarily has to be “unfair” in order for the prohibition in s 444GA(3) to be engaged: Re BCD Resources (Operations) NL [2014] VSC 259; 100 ACSR 450 at [55]-[56] per Digby J. Relevantly, the fact that shares are to be transferred without compensation to shareholders is not sufficient, in itself, to establish the requisite “unfair” prejudice: Weaver at [80].

53 The question of whether shareholders hold any residual equity of value, for the purpose of assessing the existence and nature of any unfair prejudice, is determined by comparison with the position of the shareholders in a winding up, at least where that is the likely or necessary consequence of the transfer of shares not being approved: In the matter of Mirabela Nickel Ltd (subject to deed of company arrangement) [2014] NSWSC 836 at [42] per Black J.

54 There is an evidentiary onus on the shareholders to raise any consideration telling against the exercise of the discretion, but the ultimate onus of satisfying the court that the discretion should be exercised remains on the deed administrators. It requires that the administrators prove that the transfer would not unfairly prejudice the interests of the company: Re Nexus Energy Ltd (subject to deed of company arrangement) [2014] NSWSC 1910; 105 ACSR 246 at [27] per Black J.

55 The administrators also seek machinery orders under s 447A to give effect to the share transfer for which they seek approval under s 444GA.

56 The Court’s powers under s 447A are “plenary powers to do whatever it thinks is just in all the circumstances”, but the Court must bear in mind the rights of the various groups of people affected, and that “there is a very great public interest in not permitting such voluntary administration to go on for a long period of time”: Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607 at 611 per Young J. The section is not confined to cases where it is necessary to “cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Pt 5.3A”, and there is no cogent reason to read down the application of s 447A: Australasian Memory Pty Ltd v Brien [2000] HCA 30; 200 CLR 270 at [17].

57 Bearing those principles in mind, it is apparent that the key consideration in the present case is whether there is any unfair prejudice to the members of Rex Holdings if the share transfer is approved. That in turn directs attention to what the likely alternative is to the share transfer and whether the shares have any residual value.

The share transfer: no unfair prejudice

58 As at 30 September 2025, Rex Holdings had 114,241,152 ordinary shares on issue. Implementation of the DOCA will have the effect of transferring all those shares to Air T Rex.

59 The administrators have explained, and I accept, that subject to the restructure to be brought about by the DOCA, Rex Holdings is insolvent and became insolvent from as early as 20 July 2024. There is a very large deficiency in the assets available to the Rex Group in order to satisfy the debts and claims owing to the creditors of the group. In their s 75-225 report, the administrators estimate that on a liquidation the estimated deficiency of assets over liabilities for Rex Holdings is between –$353.9 million (high) and –$391.3 million (low).

60 The independent experts approached the valuation of the residual equity in Rex Holdings in two different ways. The one methodology involved assessing the value of Rex Holdings’s operating business in administration using discounted cashflows, adding surplus operating assets/liabilities and then deducting creditor claims as at 22 October 2025. That yielded a result between –$255.6 million and –$215.6 million. The other methodology involved estimating the realisable value for each Rex Group company’s assets on a liquidation basis, aggregating these values and then deducting creditor claims. That yielded a result between –$248.9 million and –$153 million. On either approach, there is a substantial negative equity value.

61 In other words, on either basis, the equity in Rex Holdings has no value. This is because the total creditors of Rex Holdings have very substantial debts owing to them that exceed (by hundreds of millions of dollars) the value of Rex Holdings’ business or assets.

62 The aggregated realisable asset value methodology also included consideration of what claims might be available to liquidators of the companies. In this regard, the administrators’ investigations as detailed in their s 75-225 report identified that if Rex Holdings was placed into liquidation, there were only two potential recovery actions which a liquidator could bring. There would be a potential claim for $1 million in respect of an unfair preference, and there would be a potential claim for insolvent trading for a 10 day period prior to their appointment. The administrators had not quantified the claim having regard to the short period of time that would be subject to such a claim and the prospect of defences available to the directors with respect to such a claim. I accept that it is unlikely that liquidation would yield significant recoveries.

63 I am also satisfied that the shares in Rex Holdings have no economic value. The shareholders would be in the same financial position regardless of whether the DOCA is completed or the DOCA fails and the DOCA companies are wound up. That is, the shareholders will not receive any return in either scenario.

64 In contrast, however, completion of the DOCA provides for a greater estimated return to employee creditors in comparison to realising the assets of the DOCA companies in a winding up. Further, the restructuring under the DOCA will enable the transfer of the regional business to a new owner as a going concern through the share transfer, while ensuring minimal disruption to its trading and operational activities. It will also enable the continuation of the ongoing employees’ liabilities as well as the assumption of the Commonwealth’s secured debt. Those creditors would receive less than 100 cents in the dollar in a liquidation scenario.

65 In summary, the share transfer has no financial consequence for Rex Holdings’ shareholders, because their shares are worthless, but it will provide a materially better outcome for Rex Holdings by the continuation of its business. That factor weighs heavily in favour of the making of orders to permit the share transfer to proceed as it advances the primary object of Pt 5.3A, ie it provides for the business of an insolvent company to be administered in a way that “maximises the chances of the company, or as much as possible of its business, continuing in existence”: s 435A(1)(a).

Transfer of the “Gift Offer” options

66 The administrators have identified that employees of the Rex Group were entitled to receive a gift offer of ordinary shares in Rex Holdings on an annual basis, referred to as the Gift Offer. The offer was made available to various employees (referred to as the Instrument Beneficiaries) under various enterprise bargaining agreements. To take up the offer, employees were required to complete and return an acceptance form. There are otherwise no options over shares in Rex Holdings.

67 As all trading of shares in Rex Holdings was suspended on the ASX, since the commencement of the administration no shares in Rex Holdings were issued to any employees. Notwithstanding this, the administrators wrote to certain of the Instrument Beneficiaries indicating that the administrators would continue to observe the Gift Offer by making a record in a separate register (referred to as the Synthetic Register) of employee elections to take up Gift Offer shares. The Instrument Beneficiaries were notified that shares recorded on the Synthetic Register would only be issued as ordinary shares in Rex Holdings once the shares in Rex Holdings were no longer suspended from the ASX and if they were of any value.

68 The DOCA treats any claims by Instrument Beneficiaries in respect of a right to be issued shares in Rex Holdings as a claim that is compromised by the DOCA. That is where cl 1.1 of the DOCA defines “Claim” as extending to “any warrant, option or similar instrument (including an entitlement under an employee share plan) issued by a Deed Company in respect of any of its Shares”. However, against the possibility that the DOCA does not compromise such claims, perhaps because the Instrument Beneficiaries’ claims are properly conceived of as equity in Rex Holdings, then, to the extent necessary, the administrators sought orders pursuant to s 447A(1) of the Corporations Act and/or s 90-15 of the Insolvency Practice Schedule (Corporations) at Sch 2 to the Act, that Pt 5.3A of the Act is to operate as if the reference to the word “shares” in s 444GA(1) and “members” in s 444GA(3) includes:

(1) all vested or unvested, exercised or unexercised, share options, warrants or shares in Rex Holdings offered pursuant to a Gift Offer; or

(2) instruments convertible into securities in Rex Holdings, including any shares or options to which the Instrument Beneficiaries may be entitled, and that the administrators be given leave under s 444GA (as so modified) to transfer those options to Air T Rex.

69 Such relief is consistent with the approach recently taken in Clubb (deed administrator), in the matter of Toys “R” Us ANZ Ltd (subject to deed of company arrangement) [2025] FCA 1135. There, Beach J observed (at [82]) that s 444GA contains no reference to options (or other securities convertible to shares) and is limited to shares. His Honour accepted (at [91]) that the transfer of options would serve the same purpose as the transfer of shares, ie to meet the transferee’s commercial requirements for control of the company through ownership of its share capital and enable effectuation of the DOCA. His Honour also noted (at [92]) that the option holders would not be unfairly prejudiced by the transfer of their options to the transferee where, in the absence of the DOCA, there would be no market for the options, the options would not be capable of being exercised and their value was nil.

70 In making orders to facilitate the transfer of the options to the deed proponent, his Honour concluded (at [101]-[106]) that if the DOCA did not deal with the claims, then s 447A was an available source of power to modify s 444GA to bring about a result that those securities would be transferred together with the shares in the company, the exercise of which would be “consonant with the objectives set out in s 435A”.

71 I am satisfied that, for the same reasons, it is appropriate in this case to grant the relief sought by the administrators in relation to the options.

72 Although the options will arguably be compromised under the DOCA (as described above), the administrators and Air T Rex should not be left in any doubt as to the position in circumstances where the effect of the DOCA is to transfer the entirety of the ownership of Rex Holdings to Air T Rex. Also, to the extent that the options are not compromised by the DOCA, such an order is consistent with the objectives of the DOCA as noted immediately above.

73 Finally, if the DOCA is not completed, for the reasons given below, it is inevitable that Rex Holdings will be placed into liquidation, and the options will have no residual value whether they are treated as a claim for the purposes of s 553 or as equity. In other words, the position of the Instrument Beneficiaries in relation to their holding of the options is the same as that of the shareholders.

Further considerations

74 There are further considerations that support the granting of relief in relation to the transfer of the shares and the options to Air T Rex.

75 First, a detailed description of the structure and the impact on members was provided in the form of the Explanatory Statement. Shareholders were given a full opportunity to appear in opposition to the application and none has done so. No shareholder has raised any principled objection. The only objections received by the administrators have been in the nature of disappointment understandably expressed by a handful of shareholders that the shares are to be transferred without consideration.

76 Secondly, the transaction contemplated by the DOCA advances the objects of Pt 5.3A of the Corporations Act insofar as it provides for a continuation of the business of DOCA companies and the retention of their employees. This is a significant consideration given the importance of the regional business to commerce and movement in regional and rural communities throughout Australia, as evidenced by the Commonwealth’s funding of the continuation of the business during the administration.

Conclusion on the share and option transfers

77 For those reasons, I am satisfied that the share and option transfers will not unfairly prejudice the shareholders of Rex Holdings and the option holders, respectively, and that the discretion to approve the share and option transfers should be exercised.

The CFA Initial Amendment Agreement

78 During the period of the administration of the companies in the Rex Group, the Commonwealth provided funding to the administrators under a facility agreement between the Commonwealth, the Rex companies that were initially placed in administration (ie on 30 July 2024) and the administrators dated 11 November 2024. The funding arrangements have subsequently been amended from time to time.

79 It is proposed that the administrators of the DOCA companies and the liquidators of Rex Airlines, together with those companies, and the Commonwealth, will enter into an agreement to further amend the facility agreement – referred to as the CFA Initial Amendment Agreement. The effect of the CFA Initial Amendment Agreement is to release and discharge the administrators and liquidators, effective at the time of completion of the DOCA, even though the companies in the Rex Group will retain obligations under the finance arrangements with the Commonwealth. The liquidators are parties to the CFA Initial Amendment Agreement and are proposed releasees.

80 The operation of the CFA Initial Amendment Agreement is itself contingent on the Court granting an order under s 477(2B) of the Corporations Act approving the entry into of it by the liquidators.

81 There is a question as to whether s 477(2B) approval is required at all. That is because there are no obligations in the CFA Initial Amendment Agreement in respect of which performance is likely to occur more than three months after the agreement. However, it has been suggested that a release may fall into the category of such an obligation: see Re One.Tel Ltd [2014] NSWSC 457; 99 ACSR 247 at [70], [73] per Brereton J; Re Great Southern Ltd (in liq) [2015] WASC 171 at [56] per Beech J. I have my doubts about that – I am not sure that a release which takes effect once and for all, and immediately, can reasonably be said to be an “obligation” that is “discharged by performance … more than three months after the agreement is entered into” within the meaning of s 477(2B)(b). In any event, as a precaution and because of the state of the authorities, the administrators sought approval “to the extent necessary”.

82 I am satisfied that approval under s 477(2B) should be granted. The relevant purpose of the CFA Initial Amendment Agreement is simply to release the administrators and liquidators from any ongoing liability. That release will not protract the liquidation of Rex Airlines in any way. Also, delivery of a particular notice under the CFA Initial Amendment Agreement is a completion requirement of the DOCA so entry into of the CFA Initial Amendment Agreement will serve to accelerate the finalisation of the liquidation. Finally, if s 477(2B) approval is not required, granting it “to the extent necessary” does no harm.

Associate:

Dated:    15 December 2025

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