Federal Court of Australia

Ausmincon Holdings Limited, in the matter of Ausmincon Holdings Limited [2026] FCA 280

ORDERS

OTHER MATTERS:

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

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

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

(b) make submissions to the Court in relation to the proposed scheme of arrangement and the draft explanatory statement.

C. The Court notes the letter from ASIC to the directors of the plaintiff dated 13 March 2026 produced at the hearing.

THE COURT ORDERS THAT:

1. Pursuant to s 411(1) of the Corporations Act 2001 (Cth) (the Act), the plaintiff (AHL) convene and hold a meeting (Scheme Meeting) of the holders of ordinary shares in AHL (AHL Shareholders):

(a) to consider and, if thought fit, agree to (with or without any modifications, alterations or conditions) the scheme of arrangement (Scheme) proposed to be made between AHL and AHL Shareholders, the terms of which are set out in Annexure A to these orders;

(b) to be held on 16 April 2026 at the offices of K&L Gates, Level 25, 525 Collins Street, Melbourne VIC 3000 commencing at 10:00 am (Melbourne time) and virtually via an online platform.

2. The Scheme Meeting be convened by sending on or before 17 March 2026 to those AHL Shareholders appearing on AHL's register of members as at 17 March 2026 (Record Date):

(a) to each AHL Shareholder who has elected to receive electronic shareholder communications from AHL (Email Shareholder), an email which contains a link to the document substantially in the form of Annexure AMG-4 to the affidavit of Andrew Michael Gaffney sworn 16 March 2026 (Scheme Booklet) which contains, among other things, the Notice of Scheme Meeting at Annexure G (which contains details of how to attend and vote at the Scheme Meeting) and a link to the AHL Shareholder proxy voting form;

(b) to each AHL Shareholder who has elected to receive physical documents (Postal Shareholders) from AHL the following documents by pre-paid post (in the case of AHL Shareholders with an address within Australia) or pre-paid airmail (in the case of AHL Shareholders with an address outside Australia):

(i) a physical copy of the Scheme Booklet which contains, among other things, the Notice of Scheme Meeting at Annexure G to the Scheme Booklet; and

(ii) an access letter setting out URL addresses from which the Postal Shareholder can view and lodge online a proxy form for the Scheme Meeting and voting instructions;

(c) in the case of AHL Shareholders who are not Email Shareholders or Postal Shareholders, by posting to the postal address recorded for that AHL Shareholder in the register of members a cover letter setting out:

(i) the electronic address to access the Scheme Booklet; and

(ii) details of URL addresses from which the AHL Shareholder can view and lodge online a proxy form for the Scheme Meeting and voting instructions; and

(d) in relation to the Email Shareholders, if AHL receives an automatic, system generated notification that the documents were unable to be delivered to the nominated electronic address of any AHL Shareholder to whom documents were dispatched in accordance with order 2(a), then the documents set out order 2(c) be sent to such AHL Shareholder  in accordance with the process set out as soon as reasonably practicable.

3. Subject to these orders, the Scheme Meeting be convened, held and conducted in accordance with the provisions of:

(a) Pt. 2G.2 of the Act (save for any replaceable rule that is displaced or modified by AHL's constitution) that apply to a meeting of AHL's members;

(b) to the extent that it is not inconsistent with Pt. 2G.2 of the Act, AHL's constitution; and

(c) the arrangements for attending, participating and voting described in the Notice of Meeting.

4. The AHL Shareholders who are eligible to vote at the Scheme Meeting will be those whose names are recorded in AHL's register of members at 7:00 pm (Melbourne time) on 14 April 2026.

5. Voting on the resolution to approve the Scheme is to be conducted by way of a poll.

6. A proxy form in respect of the Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms by 10:00 am (Melbourne time) on 14 April 2026.

7. Ms Pauline Gately, or failing her, Mr Andrew Hall, be Chair of the Scheme Meeting.

8. The Chair of the Scheme Meeting shall have the power to adjourn the Scheme Meeting to such time, date and place (including electronically) as she or he considers appropriate.

9. The Chair of the Scheme Meeting shall have the power to postpone the Scheme Meeting to such time, date and place as she or he considers appropriate (provided that such date is no more than two weeks after the date of the Scheme Meeting set out in order 1(b)) and, in that event, notwithstanding any other part of these orders:

(a) the AHL Shareholders who are eligible to vote at the postponed Scheme Meeting will be those whose names are recorded in AHL's register of members at 7:00 pm (Melbourne time) on the date that is two calendar days before the date of the postponed Scheme Meeting;

(b) a proxy form in respect of the postponed Scheme Meeting will be valid and effective if, and only if, it is completed and delivered in accordance with its terms at least 48 hours before the time scheduled for the postponed Scheme Meeting; and

(c) a reference in these orders to the Scheme Meeting is taken to include a reference to the postponed Scheme Meeting.

10. Pursuant to r 1.3 of the Rules, compliance with rr. 2.4(1), 2.15, 3.4 and Form 6 is dispensed with.

11. On or before Friday, 10 April 2026 AHL publish on AHL’s own website a notice substantially in the form of Annexure B to these Orders.

12. The proceeding be adjourned to 9:45 am (Melbourne time) on 23 April 2026 before Justice Beach for the hearing of any application to approve the Scheme.

13. Liberty to apply.

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

Annexure A

Scheme of Arrangement

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

Annexure B

Notice

[The order entered is available on the Commonwealth Courts Portal, which attaches the notice]

REASONS FOR JUDGMENT

BEACH J:

1 Ausmincon Holdings Limited (AHL) applies pursuant to s 411(1) of the Corporations Act 2001 (Cth) for an order convening a meeting of the holders of its ordinary shares for the purposes of considering and, if thought fit, agreeing to a scheme of arrangement proposed to be made between AHL and those AHL shareholders who are scheme participants.

2 Most of the AHL shares are held by current and former employees of AHL.  The aggregate number of AHL shares on issue is 2,486,300 ordinary shares.  AHL does not have any options or other convertible securities on issue.

3 The scheme, if implemented, will result in the acquisition of all the AHL shares by AFRY Group Finland Oy (Afry), a wholly owned subsidiary of AFRY AB (Afry guarantor), for $40.22 per AHL share, representing an aggregate scheme consideration of $99,998,986. In the present case, the scheme consideration is solely cash and the price per share represents a very substantial premium to the volume weighted average price for AHL shares over the last 12 months.  Moreover, the cash amount per AHL share is above the high point of the independent expert’s valuation range.

4 It is proposed that the scheme meeting will proceed as a hybrid meeting which is scheduled to be held at 10.00 am on 16 April 2026.  So, AHL shareholders can either attend the scheme meeting in person or online.  It is proposed that Ms Pauline Gately, the non-executive chairperson of the board of AHL, will chair the scheme meeting.

5 AHL is an unlisted Australian public company headquartered in Melbourne.  It has in excess of 172 employees located in offices in Australia, Canada, South Africa and the United Kingdom.  The principal activities of AHL and its subsidiaries are the provision of mining consultancy services to the minerals industry.

6 Let me say something about the Afry entities.  Afry guarantor is a public company incorporated in Sweden and listed on the Nasdaq Stockholm.  The Afry group provides engineering, project management and advisory services across three global divisions being energy, industry and transportation.  It has over 18,000 employees and 40 plus offices.  As I have said, Afry is a wholly owned subsidiary of Afry guarantor.  Afry is an unlisted limited liability company incorporated and registered in Vantaa, Finland.  Afry does not conduct any operational business and its primary purpose is to own and manage shares in a number of operational subsidiaries.

7 Now yesterday I made the necessary convening orders for the scheme meeting.  These are my reasons for so doing.  There is one interesting and quite unusual feature of this transaction which relates to what commercial operators have referred to as a “naked no vote” break fee.  I will return to the detail of this deviation from the norm later.

Overview of the scheme and related matters

8 The scheme was announced by AHL to its shareholders on 16 February 2026. On that date a scheme implementation deed was entered into between AHL, Afry and Afry guarantor (SID). The announcement of the SID followed a due diligence process undertaken under an exclusivity deed entered into on 13 November 2025 by AHL, Afry and Afry guarantor.  I should say that yesterday at the hearing before me it was drawn to my attention that the SID had been amended by deed on 12 March 2026 to make it clear that Afry could not terminate the SID for “leakage” after the second court hearing; I do not need to dwell on this aspect.

9 As I have indicated, under the proposed scheme, AHL shareholders will receive cash consideration of $40.22 per AHL share in exchange for the transfer of their AHL shares to Afry, with the aggregate scheme consideration being $99,998,986.  Afry intends to fund the scheme consideration and related transaction costs through utilising the existing cash reserves of Afry guarantor and its wholly owned subsidiaries. As at 31 December 2025, Afry guarantor held cash or cash equivalents of SEK 1,378 million (A$220 million) based on the exchange rate as at 16 February 2026.

10 Now under the scheme, a scheme participant means an AHL shareholder as at the record date.  The record date is defined in the scheme to mean 5.00 pm on the date specified in annexure 1 of the SID or such other business day agreed by the bidder and the target.  The date agreed by the parties for the proposed record date is 24 April 2026. The implementation date is also defined in the scheme to mean the date specified in that annexure or such other business day agreed by the bidder and the target. The date so specified in this regard is 1 May 2026, which is also the proposed implementation date.

11 Under clause 4.2 of the SID, Afry has undertaken and warranted that it will provide the scheme consideration to AHL in accordance with the terms of the scheme and the deed poll. Clause 22(a) of the SID provides that Afry guarantor unconditionally and irrevocably guarantees to AHL the due and punctual performance of all of Afry’s present and future obligations under the SID and the payment of all liabilities of Afry under the SID, including, if the scheme becomes effective, Afry’s obligation to pay the scheme consideration in accordance with the scheme. Under clause 4.3 of the SID, Afry and Afry guarantor each undertake to AHL to execute and deliver the deed poll prior to the first court date and if the scheme becomes effective to perform its obligations under the deed poll.  Such a deed poll has now been executed and was tendered before me.

12 The following mechanical terms of the scheme deal with the provision of the scheme consideration to scheme participants and the transfer of the scheme shares to Afry: (a) under clause 4.2, the transfer of the scheme shares to Afry or its nominee on the implementation date is subject to the payment of the scheme consideration in accordance with clauses 5.1 to 5.3 of the scheme; (b) under clause 5.1, on the implementation date, Afry must pay (or procure the payment of) the payment of the scheme consideration to the scheme participants in accordance with clauses 5.2, 5.3 and 5.4 of the scheme; (c) under clause 5.2(a), Afry’s obligation to pay the scheme consideration under clause 5.1 is satisfied by Afry if, by no later than 5pm on the business day before the implementation date, it deposits the aggregate amount of the scheme consideration into the relevant trust account; (d) under clause 5.3, on the implementation date and subject to Afry depositing the aggregate amount of the scheme consideration into the trust account, in accordance with clause 5.2(a), AHL must pay or procure payment to each scheme participant from the trust account an amount equal to the scheme consideration for each scheme share transferred to Afry or its nominee on the implementation date.

13 So, under the terms of the scheme, the transfer of the AHL shares to Afry or to the nominee is subject to the scheme consideration having been paid from the trust account to the scheme shareholders under the scheme.  Clearly, having the transfer of the AHL shares to Afry or to the nominee being subject to the payment of the scheme consideration out of the trust account to the scheme shareholders effectively removes any performance risk in so far as the transfer of the AHL shares to Afry or to the nominee in return for the scheme consideration is concerned.

14 Let me deal with another topic.

15 Additional remuneration for AHL directors for extra services is permitted under AHL’s constitution. The AHL board has resolved to pay an additional one-off remuneration payment of $80,000 to Ms Gately to compensate for her additional hours and extra services beyond her customary duties as a non-executive chair with respect to the scheme.  Ms Gately is not an AHL shareholder.  This extra services payment is subject to the scheme becoming effective.

16 Further, there have been discussions between AHL and Afry regarding long term incentives post the scheme implementation date, which are likely to include a cash retention payment to 8 key senior AHL executives, including the chief executive officer and managing director Mr Andrew Hall and executive director Mr Mark Flanagan, if they remain with the Afry group for 3 years post completion. The potential future amounts under the contemplated retention arrangements is in aggregate approximately $1.2 million.  Each of those 8 senior executives are AHL shareholders.  But there are currently no binding commitments between Afry and those 8 senior executives regarding the potential retention payments and this matter is to be the subject of further consideration post the scheme implementation date.

17 Let me summarise some other points.

18 First, under the AHL constitution an AHL shareholder is not permitted to transfer their AHL shares other than in accordance with a shareholders agreement between AHL and each person holding AHL shares who has executed a deed of adhesion.  As part of the broader scheme transaction, it is proposed to have a general meeting after the scheme meeting at which resolutions are to be put regarding amending the constitution and terminating any shareholders agreement in order to facilitate the transfer of the AHL shares under the terms of the scheme.

19 Second, under the SID a break fee is payable by AHL upon the occurrence of certain events including where the AHL shareholders do not approve of the scheme. The amount of the break fee is $1 million inclusive of GST which represents slightly over 1% of the equity value of AHL as reflected by the aggregate scheme consideration amount of $99,998,986.

20 Now a break fee which is potentially payable if shareholders do not approve a proposed scheme of arrangement at a scheme meeting is known as a “naked no vote” break fee. Whilst naked no vote break fees are uncommon in scheme of arrangement transactions, there have been cases where a court has accepted a naked no vote break fee as a feature of that particular transaction by reason of the particular circumstances in that case.  I will discuss this aspect later.

21 Third, the AHL directors have unanimously recommended that AHL shareholders vote in favour of the scheme in the absence of a superior proposal and subject to the independent expert continuing to conclude that the scheme is in the best interests of AHL shareholders.

22 Fourth, the draft independent expert’s report from BDO Corporate Finance Pty Ltd (BDO) is set out in annexure B to the scheme booklet. The opinion of BDO is that the scheme is fair and reasonable and therefore is in the best interests of AHL shareholders in the absence of a superior proposal.  BDO has assessed the value of an AHL share to be in the range of $23.61 to $36.08.  As noted, the scheme consideration of $40.22 per AHL share is above the high end of this valuation range.

Statutory framework

23 There is no question that my power has been enlivened under s 411(1) to order the convening of a scheme meeting.

24 Further, as to me being satisfied under s 411(2)(b) that ASIC has had a reasonable opportunity to examine the terms of the scheme and a draft of the explanatory statement and to make submissions in relation to the scheme and the draft explanatory statement, ASIC has now provided a letter confirming that it does not propose to intervene to oppose the scheme at this stage.

25 As to the question of discretion, in Re Amcor Ltd [2019] FCA 346 I made various observations (at [47]) regarding the discretion conferred on the Court when considering an application for orders pursuant to s 411(1).  I do not need to repeat those observations.

26 Now various matters were specifically drawn to my attention and relevant to the exercise of my discretion including: (a) non-performance risk and non-completion risk; (b) the exclusivity provisions; (c) the break fee and reverse break fee; (d) the question of separate classes in terms of the potential retention payments; and (e) the unanimous recommendation of the directors for the scheme and the associated question of director benefits in terms of the extra services payment and the potential retention payments. Let me address some of these matters in more detail.

Non-performance risk and non-completion risk

27 In the present case there is no significant non-performance or non-completion risk.

28 If the scheme is later approved and becomes effective, then the transfer of the AHL shares to Afry under the scheme is subject to the scheme consideration having been paid by AHL to the scheme participants out of the trust account. Having the transfer of the AHL shares to Afry subject to the payment of the scheme consideration to the scheme participants out of the trust account effectively removes any performance risk in so far as the transfer of the AHL shares in return for scheme consideration is concerned.

29 Further, both Afry and Afry guarantor have entered into a deed poll in favour of the scheme shareholders, under which Afry undertakes in favour of each scheme participant to provide the scheme consideration to the trust account on behalf of each scheme participant subject to and in accordance with the terms of the scheme and Afry guarantor covenants in favour of each scheme participant to procure that all obligations of Afry under the deed poll and the actions attributed to Afry guarantor under the scheme are met.

30 Whilst the deed poll is in place, by reason of the terms of the scheme, scheme participants will likely not need to rely on any of the covenants in the deed poll as far as the receipt of the scheme consideration in return for the transfer of their AHL shares to Afry is concerned.

31 It is also noted that under the SID, Afry undertakes and warrants to AHL in its own right and as trustee and nominee for each scheme participant that it will provide the scheme consideration to AHL on behalf of each scheme participant, in accordance with the terms of the scheme and the deed poll.

32 Further, under the deed poll, in addition to undertaking to provide the scheme consideration to each scheme shareholder in accordance with the terms of the scheme, Afry also covenants in favour of each scheme participant to perform all actions attributed to it under, and otherwise comply with, the scheme as if it were a party to the scheme.  Further, under the scheme, each scheme participant irrevocably appoints AHL as their agent to enforce the deed poll and AHL undertakes in favour of each scheme participant that it will enforce the deed poll against Afry and Afry guarantor on behalf of, and as agent and attorney for the scheme participants.

33 I am satisfied that there are no significant concerns on the current material before me concerning any non-performance risk or non-completion risk.

Exclusivity provisions

34 Clause 13 of the SID contains exclusivity provisions, comprising the following: (a) no existing discussions (clause 13.1); (b) no shop restriction (clause 13.2); (c) no talk restriction (clause 13.3); (d) no due diligence (clause 13.4); (e) notification of competing proposals (clause 13.5); (f) matching right (clause 13.6); and (g) fiduciary exception (clause 13.7).

35 The fiduciary exception in clause 13.7(a) applies to an actual, proposed or potential bona fide written competing proposal where the AHL board, acting in good faith, has determined: (a) after consultation with its legal and financial advisers, that the competing proposal could reasonably be expected to lead to a superior proposal; and (b) after receiving written advice from its external legal advisers, that not undertaking that act would, or would be reasonably likely to, involve a breach of the fiduciary or statutory duties owed by any AHL director.

36 Under clause 13.7(b) of the fiduciary exception clause, AHL must notify Afry, as soon as reasonably practicable, and in any event within one business day, if it proposes to take any action in reliance on the exception contained in clause 13.7.

37 The exclusivity period is defined in the SID to be the period from the date of the SID to the earlier of the termination of the SID, the effective date and the sunset date. The sunset date is defined in the SID to mean 31 July 2026 or such other date and time agreed between Afry and AHL. As such, the exclusivity period at its latest date is some 5 and half months unless extended by agreement by AHL and Afry.  This exclusivity period in my view is reasonable.

38 Further, and as is acceptable, the no talk restriction and no due diligence clause are subject to the terms of the fiduciary exception in clause 13.7.

The “naked no vote” break fee and reverse break fee

39 Let me address the break fee first, which is $1 million (inclusive of GST) and represents just over 1% of the equity value of AHL as reflected by the aggregate scheme consideration amount of $99,998,986.

40 As I have indicated, a break fee which is potentially payable if shareholders do not approve a proposed scheme of arrangement at a scheme meeting is known as a “naked no vote” break fee. Now whilst naked no vote break fees are uncommon in scheme of arrangement transactions, there have been cases where such a fee has not been seen as a bar to the necessary convening or approval orders.

41 Let me begin by referring to the Takeover Panel’s Guidance Note 7 – Deal Protection (GN 7) which addresses break fees in paragraphs 48 to 52.  Relevantly, for present purposes, paragraph 48 states as follows – “In the absence of other factors, a break fee payable by a target not exceeding 1% of the equity value of the target is generally not unacceptable. There may be facts which make a break fee within the 1% guideline unacceptable - for example if triggers for payment of the fee are not reasonable (from the point of view of coercion).”  Footnote 37 to GN 7, which appears at the end of the sentence just set out, notes as follows – “‘Naked no vote’ break fees (ie, fees payable by a target to a bidder if the takeover is rejected by the target’s shareholders even though there is no competing bid) may fall into this category. See Ausdoc Group Ltd [2002] ATP 9 at [43].”  But this footnote uses the words “may fall” rather than being definitive.

42 Paragraph 49 of GN 7 refers to the following factors inter-alia that the Panel is guided by in considering whether a break fee gives rise to unacceptable circumstances: (a) whether the fee was agreed after a public, transparent process designed to elicit proposals; (b) whether the proposal was solicited by the target; (c) whether the fee is fixed or capped (either in dollar or percentage terms); (d) whether the fee (on a cost per share basis) is less than the premium under the bid; (e) the cost, effort or risk involved in making the proposal; (f) whether the fee reimburses actual expenses; (g) whether another bidder has increased its bid or made a bid and whether the fee was material in determining the price that the competing bidder was prepared to pay. In that case the fee may not be anti-competitive; and (h) any other relevant factors, such as whether the obligation is limited to a reasonable period.

43 Now although these factors apply to the consideration by the Panel of break fees in the conventional sense, being break fees that are not potentially payable if shareholders vote down a scheme at a scheme meeting, there is nothing on the face of GN 7 to exclude these factors being considered in the context of a naked no vote break fee.

44 Let me turn to some of the relevant authorities.

45 In Re Bolnisi Gold NL (No 2) (2007) 165 FCR 45, Lindgren J addressed, at the second court hearing, the naked no vote break fee that was a feature of that transaction and potentially payable by Bolnisi (the target) to Coeur (the bidder).  It would seem that this was the first case in which an Australian court had considered the topic of naked no vote break fees in the context of a scheme of arrangement. In that case, the fact that the break fee was a naked no vote break fee had come to his Honour’s attention after the first court hearing. So, his Honour relisted the matter for further evidence and submissions on the question of whether court approval to the scheme should be withheld by reason of the naked no vote break fee.

46 Further, there was also a reciprocal break fee that was payable by Coeur to Bolnisi if Coeur’s shareholders did not pass a particular resolution in order for the scheme to be implemented.  As to this reciprocal break fee, Lindgren J observed (at [38]) that he accepted “that if Bolnisi’s directors had not agreed to the Bolnisi naked no vote break fee provision, Coeur’s directors would not have agreed that Coeur should accept a liability to pay Bolnisi a break fee if the Coeur shareholders failed to pass a resolution increasing the number of Coeur’s authorised shares.”

47 Lindgren J undertook an international comparison on the topic and also noted that two decisions of the Takeovers Panel were relevant, being Re Ausdoc Group Ltd (2002) 42 ACSR 629 and Re National Can Industries (No 1) (2003) 48 ACSR 409.

48 Lindgren J said (at [12]):

In my opinion, it will be appropriate for the court to decline to order that a scheme meeting be convened, or that a scheme be approved, if the court is satisfied that a naked no vote break fee is so large as to be likely to coerce the shareholders into agreeing to the scheme, rather than assessing the offer on its merits. However, the court should not readily find that the target company’s directors have committed the company to an arrangement that will have the impermissible coercive effect on the company’s shareholders, and nor should the court seek to substitute its view of the best interests of the company for that of the directors.

49 As to Re Ausdoc Group Ltd, Lindgren J observed (at [13]) as follows:

In Re Ausdoc Group Ltd (2002) 42 ACSR 629 a break fee was payable, inter alia, where a 90% minimum acceptance condition of a takeover offer was not satisfied. The Panel found the break fee provision to be unacceptable and accepted undertakings by the bidder and the target company not to enforce the provision or to pay the fee, respectively. The Panel stated (at [44]) that: “In assessing the potential for the 90% break fee to influence the decision of Ausdoc shareholders, we had regard to the fact that … [t]he 90% break fee represents approximately 42% of [that year’s] expected profit figure”. The Panel had regard to the fact that payment of the break fee would mean that shareholders would not be paid a dividend for the year. The Panel accepted ASIC’s submission that the break fee provision was coercive, that naked no vote break fees are to be distinguished from others, and that in the particular circumstances of the case, only a de minimis naked no vote break fee could be supported.

50 Now it should be noted that the Panel’s observation in Re Ausdoc Group Ltd that the relevant break fee ($2.5 million) was unacceptable in that case was made at [43], where it was said:

We consider the 90% break fee to be unacceptable. We agree with ASIC’s submission that the fee may have the effect of coercing Ausdoc shareholders to accept ABN AMRO’s bid even where, absent the break fee, they do not consider it to be in their best interests. We also agree with ASIC that this form of break fee is to be distinguished from other forms of break fees payable where the bid does not succeed due to a higher rival bid because the existing shareholders of the target, rather than the successful rival bidder, bear the cost of the break fee.

51 As to Re National Can Industries (No 1), Lindgren J stated (at [14]):

In Re National Can Industries (No 1) (2003) 48 ACSR 409 the Panel stated (at [42]) that it did “not entirely reject the notion that a fee should be payable if and when a proposal the directors have endorsed is rejected by shareholders”, and that “[a]s GN7 put it, such a fee may be an appropriate price to secure an opportunity broadly in the nature of an option”. Later, at [51], the Panel again referred to the naked no vote break fee as “in effect the price paid to secure the opportunity for shareholders to consider the proposal”. The review Panel (at [33]) expressly agreed with the former statement by the original Panel.

52 After referring to those two Panel decisions, his Honour noted (at [15]) that he saw no distinction between the 90% minimum acceptance condition in Re Ausdoc Group Ltd and the minimum voting percentages in s 411(4)(a)(ii) and also observed (at [15]) that the view expressed in Re National Can Industries (No 1) was “inconsistent with any notion that a naked no vote break fee can only be supported if it is de minimis.”

53 Lindgren J ultimately concluded that the naked no vote break fee was not objectionable for the purposes of the application under s 411(1).  In so concluding, his Honour observed that he had particular regard to the following considerations: (a) the amount of the break fee would not exceed the amount of the costs and expenses of Coeur that would have been wasted if the scheme was not agreed to by the Bolnisi shareholders; (b) the directors of Bolnisi believed that they were acting in the best interests of the shareholders of Bolnisi in agreeing that the break fee should be payable in the naked no vote situation; (c) the break fee was a reciprocal one, in the sense that an identical amount was payable by Bolnisi and Coeur and it was payable by Bolnisi and by Coeur if the Bolnisi shareholders or the Coeur shareholders respectively should fail to pass a resolution on which implementation of the scheme depended; (d) it was important for Bolnisi to have the benefit of the Coeur break fee provision and it could do so only if it agreed to the Bolnisi break fee provision; (e) the amount of the break fee was less than the one percent “ceiling” referred to by the Takeovers Panel (see GN 7) and could not be regarded as so large as to be likely to coerce shareholders into agreeing to the scheme; and (f) no shop, no talk and break fee provisions were agreed following arm’s length commercial negotiations over a period of one month in which both Bolnisi and Coeur were separately advised and represented by external legal advisers and financial advisers.

54 Further, in Re Rusina Mining NL [2010] FCA 517, Barker J considered that the naked no vote break fee in that case (US$250,000) did not provide a basis for refusing to make first court hearing orders even though there was not a reciprocal naked no vote break fee in that case. As to relevant matters to take into account when considering a naked no vote break fee, his Honour stated as follows (at [50] and [51]):

Counsel for the applicant submits the applicant’s break fee provision is in part a “naked” break fee. A break fee may be described as “naked” where it is payable if the scheme is not approved by the applicant’s shareholders: see Re Bolnisi Gold NL (No 2) (2007) 65 ACSR 510; [2007] FCA 7078 (Re Bolnisi), at [2]. Here however the break fee is only partially naked because it is only triggered in circumstances where the shareholders vote against the scheme notwithstanding that an independent expert has opined that the scheme is in the best interest of the shareholders: MIA cl 9.3I. While the break fee provisions are reciprocal in some respects, they are not reciprocal naked break fees, that is if European Nickel’s shareholders fail to approve the resolutions necessary to give effect to the scheme this will not trigger European Nickel’s obligation to pay the break fee.

While reciprocity may be a basis for considering that a naked break fee does not operate unfairly — in this respect, it was one of the considerations taken into account in Re Bolnisi— counsel for the applicant submits that the absence of reciprocity does not suggest a naked break fee is unfair. In this a naked break fee is essentially the price of buying the opportunity for the applicant’s shareholders, which is akin to an option: see Re Bolnisi, at [14]; Re National Can Industries Ltd (No 1) (2003) 48 ACSR 409; [2003] ATP 40; (Takeovers Panel), at [42], [51]. An option should not be considered per se an unfair transaction, nor should a naked break fee be so considered. Counsel submits that the most important consideration is whether the break fee is excessive. That is, whether it operates as a penalty or is likely to coerce the shareholders to vote in favour of the scheme, as discussed in Re Bolnisi, at [12]. In the context of takeovers, a break fee of less than 1% of the equity value of a company is not considered likely to be coercive: Takeovers Panel Guidance Note 7, [8]; APN News, at [49]–[55]; Re Bolnisi, at [39].

55 Further, in Re Pulse Health Ltd [2017] NSWSC 140, one of the circumstances in which the break fee of $1.2 million was payable, although the break fee was not referred to as a naked no vote break fee, was if the scheme was voted down at the scheme meeting in circumstances where a particular shareholder party holding 15.7% voted against the scheme.  Black J observed that such a break fee was not a reason to decline making first court hearings orders observing as follows (at [24]):

… Mr Henderson’s evidence is that this provision was required by Healthe Care as one of the conditions to entering into the Scheme Implementation Deed, where the Sante Capital Parties acquired approximately 10.9% of the Pulse shares in July 2016 (a holding that has now increased to about 15.7%) and Healthe Care was concerned that the scheme may be voted down by those parties with a view to pursuing their own proposal for Pulse (Henderson [22]–[23]). Mr Rich submits, and I accept, that Healthe Care’s position reflects the fact that a prospective acquirer of shares under a scheme would not wish to spend considerable time and money on a proposal and then find that a substantial shareholder of the target has used that proposal as a “stalking horse” for another proposal of their own. Mr Rich also points out, and I also accept, that it was necessary for Pulse to accept that provision in order to allow its shareholders an opportunity to consider the scheme (Hays [26]–[27]). Where it was commercially reasonable for Pulse to agree to that provision and it is disclosed in the scheme booklet, it is not a reason to decline to make the orders sought.

56 In summary, the following principles can be distilled.

57 First, naked no vote break fees are not necessarily coercive.  But of course it will be appropriate for the court to decline to order that a scheme meeting be convened, or that a scheme be approved, if the court is satisfied that a naked no vote break fee is so large as to be likely to coerce the shareholders into agreeing to the scheme.

58 Second, a naked no vote break fee does not need to be de minimis in amount.  A naked no vote break fee equal to the 1% guidance in GN 7 will not, of itself, be unfair if the dollar amount in absolute terms is not so large as to coerce shareholders to agree to the scheme without considering its merits.  And in that context relevant matters to consider include: (a) whether the amount of the naked no vote break fee appears to be a genuine pre-estimate of the costs likely to be incurred by the bidder; (b) whether in a particular transaction, the naked no vote break fee is essentially the price of buying the opportunity for the scheme company’s applicant’s shareholders; (c) whether the board formed the view that there was a high probability that the shareholders would accept the offer for the company at the price proposed by the bidder; (d) whether the naked no vote break fee could easily be funded from the scheme company’s existing cash reserves; and (e) to the extent not already covered, the factors set out in paragraph 49 of GN 7.

59 Third, the absence of a reciprocal naked no vote break fee does not mean that the naked no vote break fee is unfair.

The evidence regarding the naked no vote break fee

60 Now why was the naked no vote break fee sought by Afry?  And why was it agreed to by AHL?

61 As Mr Greg Ahern, counsel for AHL, pointed out, the entry into both the exclusivity deed and the terms sheet in November 2025 followed an extensive and comprehensive non-binding indicative offer (NBIO) process.  Prior to Afry lodging its NBIO, Afry had expressed the strong preference to acquire AHL business / assets by way of a private M&A transaction with all of the protections, warranties and indemnities that often accompany such a private M&A transaction. The AHL board required the transaction to be structured by way of a scheme of arrangement.  AHL initially pushed back against structuring the transaction as a private M&A deal (where no AHL shareholder approval was to be sought) and the inclusion by Afry of the naked no vote break fee element.  In subsequent negotiations, Afry proposed to increase its offer price but to otherwise proceed on the terms of the Afry NBIO.  Afry said during those negotiations it would not proceed with its proposal without a naked no vote break fee.  In this sense, the naked no vote break fee was the price of buying the opportunity to put Afry’s proposal to the AHL shareholders.  In considering the NBIO’s submitted by the short listed parties, the AHL board considered the Afry NBIO (as increased) to be the most compelling even though it included a naked no vote break fee.  The AHL board also considered that AHL shareholder approval of the proposed scheme was likely and that accordingly the risk of the no naked vote break fee being potentially payable by reason of AHL shareholders not approving the proposed scheme was low.

62 Accordingly, the AHL board determined to proceed with the Afry NBIO and on 13 November 2026, AHL entered into the exclusivity deed and the terms sheet, which included the naked no vote break fee.  On 16 February 2026 AHL entered into the SID which also included the naked no vote break fee.

63 Let me make some other points.

64 First, as at the date of execution of the SID, Afry’s evidence is that it has incurred costs in excess of $1 million.  Further, and as I have indicated, the case before me is a little unusual in the sense that Afry never intended to proceed by way of a scheme of arrangement but was persuaded to do so by AHL.  This of course resulted in what Afry saw to be additional expense.

65 Second, there is little doubt that AHL would have the cash on hand to pay the break fee. Recently prepared accounts including a consolidated balance sheet for the AHL group show that AHL has available cash and cash equivalents in excess of $9 million.  There would be little concern of shareholders at the scheme meeting as to the inability of AHL to pay the break fee in the scenario of a no vote, such that they would be unduly influenced to agree to the scheme in order to avoid financial difficulties for AHL.

66 Third, although there is no symmetry between the break fee and the reverse break fee in terms of any analogy in the reverse break fee to the “naked no vote” aspect in the break fee, that is only one matter to consider; in Re Rusina Mining NL this was not seen as creating an insuperable difficulty.  Likewise in the case and context before me.

67 In summary, the provision of the naked no vote break fee was not an impediment to my making the necessary convening orders.

The reverse break fee

68 Pursuant to clause 15.2 of the SID, a reverse break fee in the same amount as the break fee is payable by Afry to AHL if the SID is terminated by AHL under clause 16.1(a) of the SID due to a material breach of the terms of the SID by Afry.  Under clause 15.4 of the SID the reverse break fee is not payable if the scheme becomes effective.  Clause 15 of the SID does not provide for the reverse break fee being payable in the event that the scheme becomes effective but Afry does not pay the scheme consideration on the implementation date, however clause 15.7 of the SID (headed limitation of liability) provides that nothing in that clause limits the liability of Afry under the deed poll. As to the enforcement of the deed poll, clause 7.7 of the proposed scheme provides that AHL undertakes in favour of each scheme participant that it will enforce the deed poll against the bidder and the guarantor on behalf of and as agent and attorney for the scheme participants.

69 I have no difficulty with the reverse break fee.

Separate class considerations

70 The separate class test is well known and needs no detailed elaboration; see Re Oz Minerals Limited [2023] FCA 197 at [61] and Re Healthscope Ltd (2019) 139 ACSR 608 at [107].

71 Now cash payments or incentives in connection with a scheme do not require the recipient of those payments or benefits who is also a shareholder to meet as a separate class (see Re RXP Services Limited [2021] FCA 38 at [32] to [45], Re Oz Minerals Limited at [63] and Halley J in Re SILK Laser Australia Limited [2023] FCA 1191 at [39]).

72 In Re Capitol Health Limited [2024] FCA 1120, I outlined the position on the topic of cash payments or incentives at [83] to [91]:

Similarly, cash payments or incentives in connection with a scheme do not require the recipient of those payments or benefits who is also a shareholder to meet as a separate class.

No separate class meeting is required where the cash payment or incentive is conditional on the scheme becoming effective. The additional cash payment or incentive does not mean that the rights of the recipients of those cash payments are so dissimilar as to make it impossible for them to consult together with the other shareholders at one meeting with a view to their common interest.

The short term incentive payment that Capitol has resolved to pay Mr Walter for the 2025 financial year, which becomes fully payable if the scheme becomes effective, does not require separate classes.

Now as to the retention payments, they are being paid to certain employees including Mr Walter as an incentive for those employees to remain with the business to assist with the implementation of the scheme. These payments are not conditional on the scheme becoming effective but are conditional on the relevant employee remaining employed on certain alternate dates.

Similarly, as to the exertion fees to be paid to the non-executive Capitol directors and to certain employees, they also are not conditional on the scheme being implemented and are being paid in recognition of the additional workload and time commitment associated with the scheme.

Payments in the context of a scheme which are not conditional on the scheme becoming effective do not give rise to the need for separate classes.

Further, on the topic of exertion fees payable to non-executive directors, it is convenient to refer here to another dimension. Black J in Re Pacific Smiles Group Limited [2024] NSWSC 812 at [17], Re Genex Power Limited [2024] NSWSC 752 at [17] and [18] and Re MyDeal.com.au Limited [2022] NSWSC 1094 at [41] to [43] addressed the topic of special exertion fees or additional remuneration payable to directors, which did not depend upon the outcome of the scheme. But he was considering this not in the context of class questions but in the context of the directors making a voting recommendation, with Black J noting that such payments, where disclosed, did not prevent the relevant director from making a voting recommendation. Implicitly, no class problem was perceived or exposed for consideration.

Further, as to the proposal that two of the non-executive Capitol directors will join the merged group and the proposal that Mr Walter will transition to a new role in the merged entity, in the context of a merger these matters are not relevant to considerations of class composition.

In my view none of these arrangements require any of those shareholders who hold the relevant incentives to meet separately as a separate class from those shareholders who do not hold such incentives in order to consider and vote on the scheme.

73 In Re SILK Laser, Halley J in the context of class composition discussed the matter of a potential incentive payment to certain employees which potential payment was subject to the scheme becoming effective and integration objectives being completed.  Halley J was satisfied that this potential payment did not give rise to the need to meet as a separate class, observing (at [39]):

The potential 2024 Incentive Payments are dependent upon a period of service post implementation of the Scheme and the completion of certain integration objectives. In those circumstances, I am satisfied that the 2024 Incentive Payments do not give rise to any concern that the potential recipients of those payments relevantly constitute a separate class.

74 Indeed the position is even stronger in the context before me that there is no separate class question.  There are currently no binding commitments between Afry and the relevant 8 senior executives regarding the potential retention payments, albeit that such potential payments are likely to include a cash retention payment to 8 key senior AHL executives if they remain with the Afry group for 3 years post completion.

Ms Gately and the directors’ unanimous voting recommendation

75 It is appropriate for Ms Gately to join with the other directors in making a voting recommendation that AHL shareholders vote in favour of the scheme, notwithstanding that she will be receiving the extra services payment.  Now as to the topic of directors receiving exertion fees making a voting recommendation, in Re Capitol Health Limited (where the exertion fees were not conditional upon the scheme being implemented) I said (at [101]) that it was not inappropriate for each of the non-executive directors to make a voting recommendation notwithstanding that they would be receiving the exertion fees; see also Re Viridian Financial Group Ltd [2025] FCA 997 at [98] per Anderson J.

76 The fact that Ms Gately’s extra services payment is subject to the scheme becoming effective does not alter the position as regards her making a voting recommendation. Even though the payment is subject to the scheme becoming effective, the purpose of the payment is to compensate for her additional hours and extra services beyond her customary duties as a non-executive chair with respect to the scheme, which time will have been spent and work undertaken even if the scheme does not become effective.  In this context, the payment is not one being made as an incentive to promote the scheme.  Ms Gately is not an AHL shareholder.

77 Further, and for similar reasons, it is appropriate for each of Mr Hall and Mr Flanagan to make a voting recommendation, notwithstanding the potential retention payments.

Scheme conditions – AHL’s constitution and the shareholders agreement

78 Conditions numbered 7 and 8 in Schedule 1 to the SID provide in general terms that shareholder approval must be obtained before 8.00 am on the second court date to amend the AHL constitution to remove any restrictions on the transfer of the AHL shares and to terminate the shareholders agreement. Both of these conditions are subject to orders being obtained at the second court date to implement the scheme.

79 Rule 28 of the AHL constitution deals with the transfers of AHL shares. Rule 28.1 provides that subject to the constitution, a member may transfer a share by any means permitted by the Act or by law but also provides that AHL must not register a transfer that does not comply with this rule or the shareholders agreement.  Rule 28.2 provides in general terms that despite any rights conferred by the constitution, a member must not sell, assign, transfer, declare a trust of or otherwise dispose of any shares held by them to which they are entitled, or confer any rights in respect of a share, otherwise than in accordance with the shareholders agreement.

80 The shareholders agreement regulates the issue of AHL shares, including to eligible persons and maximum holdings, and the sale of existing AHL shares.  It is proposed to have a general meeting of AHL shareholders immediately after the scheme meeting at which resolutions are to be put to AHL shareholders to amend the constitution and terminate shareholders agreement in order to satisfy conditions 7 and 8 in Schedule 1 to the SID and to facilitate the transfer of the AHL shares under the terms of the scheme.

81 None of these scheme conditions obviously trouble me at this stage.

Section 411(17)

82 Any operation of s 411(17) is a matter for the second court hearing.  In my view, s 411(17) does not prevent a bar to a meeting now being ordered to be convened if it seems likely that ASIC will produce the relevant statement at the second court hearing.  Now given that ASIC does not oppose the application for convening the meeting, it is appropriate for me to proceed at this stage on the basis that an application for approval would be unopposed by ASIC, and that ASIC will in due course provide a statement in the form contemplated by s 411(17)(b).

Will AHL shareholders be properly informed?

83 As should be readily apparent, there are three aspects to the requirements of s 412(1).

84 First, the explanatory statement must explain the effect of the compromise or arrangement, and in particular state any material interest of the directors and the effect of those interests on the compromise or arrangement so far as it is different from the effect of the like interests of other persons. Now these matters are addressed in the draft scheme booklet. And the information makes it clear that that the effect of the arrangement on the director’ interests is the same as on the like interests of others.

85 Second, the explanatory statement must set out the prescribed information. That prescription is in reg 5.1.01 and Schedule 8 (Part 3) of the Corporations Regulations 2001 (Cth).

86 Third, the explanatory statement must set out any other information that is material to the making of a decision whether to agree with the compromise or arrangement, being information which is within the knowledge of the directors and has not previously been disclosed. In my view the draft scheme booklet on its face seems to satisfy that requirement.

87 Now in my view as to these matters, the scheme booklet sets out the features and effects of the scheme and includes the explanatory statement as required by s 412(1)(a).  And as far as the prescribed information is concerned, a compliance checklist or schedule has been prepared. Further, the opinion of BDO is that the scheme is fair and reasonable and therefore is in the best interests of AHL shareholders in the absence of a superior proposal.  BDO’s report is an annexure to the scheme booklet.

88 Further, appropriate evidence has been adduced before me concerning the verification of the scheme booklet by both AHL and Afry.

89 Further, as to the requirement for the scheme booklet to be registered under s 412(6), under s 412(8) ASIC must not register the copy of the explanatory statement unless the statement appears to comply with the Act and ASIC is of the opinion that the statement does not contain any matter that is false in a material particular or materially misleading in the form or context in which it appears.

Conclusion

90 In summary, in my view the scheme is fit for consideration by AHL shareholders and the scheme is of such a nature and cast in such terms that, if agreed to at the scheme meeting, it would likely be approved at the second court hearing.  Further, there is no issue arising from the scheme which would unquestionably lead to a refusal to approve the scheme at the approval hearing and it could not be said that the scheme is on its face “so blatantly unfair or otherwise inappropriate that it should be stopped in its tracks before going any further” (Re Foundation Healthcare Ltd (2002) 42 ACSR 252 at [44] per French J).

91 For the foregoing reasons, yesterday I made the necessary convening orders.

Associate:

Dated:    17 March 2026