- within Finance and Banking topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Securities & Investment industries
This week's TGIF considers Re Lucapa Diamond Company Ltd; Ex Parte Re Lucapa Diamond Company Ltd [2025] WASC 560 in which the Supreme Court of Western Australia granted leave under section 444GA of the Corporations Act 2001 (Cth) (the Corporations Act), to transfer shares and options in a company in circumstances where unsecured creditors would be paid in full and shareholders would receive some payment for their shares.
Key takeaways
- This decision is the first published judgment to consider a section444GA application where the deed of company arrangement (DOCA) anticipated value being paid to shareholders for the transfer of their shares.
- The same principles governing the granting of leave under section 444GA(1)(b) applied. The key consideration being whether the transfer would unfairly prejudice the interests of members of the company, not that there be no return to shareholders, and whether the Court should exercise their discretion in light of the objects of Part 5.3A of the Corporations Act.
- The decision demonstrates again that high quality independent valuation evidence and evidence of an extensive sale process greatly assists the Court in granting leave in section 444GA applications.
Background
The Lucapa Group entered administration in May 2025. The Administrators conducted a sale process for the company's assets. This process resulted in a DOCA which proposed a transfer of the shares and options in Lucapa Diamond Company Ltd. Priority employee creditors would not receive a distribution as they would continue to be employed by the company. Former priority employee creditors and unsecured creditors would receive a return of 100 cents in the dollar, and shareholders would receive $0.018 per share.
The creditors unanimously resolved that the Lucapa Group enter into the DOCA. The bid accepted was the only one contemplating a return to shareholders. Ten of the top 11 shareholders of Lucapa confirmed they supported the transfer of shares under section 444GA of the Corporations Act.
There was opposition from two shareholders, who alleged the return to shareholders was undervalue and the Administrators and the valuer were not independent, and an alternative transaction was not sufficiently pursued. However, those shareholders did not file a notice of intention to be heard and did not appear to oppose the application.
The issues
Orders were sought pursuant to section 444GA of the Corporations Act for leave to transfer all of the issued shares in Lucapa to the DOCA proponent. Orders were also sought under section 447A of the Corporations Act to alter the operation of Part 5.3A so section 444GA could be used to transfer all options on issue in Lucapa to the DOCA proponent.
The Administrators relied on the extensive sale process they conducted, along with two independent expert reports prepared by FTI Consulting on the residual value of shares and options in Lucapa on a liquidation scenario and the value of the Lucapa Group's exploration assets.
The decision
The Court followed the principles set out bythe Supreme Court of Western Australia, Court of Appealin Kipoi Holdings Mauritius Limited v Kirman and Bauer as joint and several administrators of Tiger Resources Limited (subject to deed of company arrangement) [No 4] [2024] WASCA 145. The two key considerations on a section 444GA application being whether the proposed transfer would not unfairly prejudice the interests of members of the company, and whether the Court, in its residual discretion, is willing to grant leave having due regard to the objects of Part 5.3A set out in section 435A of the Corporations Act.
Justice Hill commented that section 444GA did not require that there be no return to shareholders on the implementation of the DOCA. The condition was that shareholders would not be unfairly prejudiced.
Her Honour stated if liquidation was the only realistic alternative to the proposed DOCA, and shareholders would not receive any distribution in a liquidation, ordinarily there would not be any prejudice, or at least no prejudice that had the required quality under the Corporations Act of being unfair. The fact that none of the various proposals received during the Administrators' sales process produced a return to shareholders on a liquidation scenario supported an inference being drawn that there was no prospect of a liquidator receiving an offer that would produce a return. The offers received during the sale process being particularly cogent evidence of the true market value of the asset.
Her Honour stated the ability of an administrator to bring an application under section 444GA, even if there was a return to shareholders, is consistent with the context and purpose of Part 5.3A of the Corporations Act (set out in section 435A).
The DOCA contemplated a members' scheme of arrangement should leave not be granted under section 444GA. Her Honour held that the fact an alternative route could be pursued did not mean that the application under section 444GA was inappropriate or beyond power.
Her Honour rejected the complaints of the two shareholders as there was no evidence filed which enabled an inference to be drawn that the alternative transactions suggested by shareholders could occur in a reasonable timeframe or there was any prospect of the residual value in the shares being greater than the DOCA proposal.
Following Clubb (deed administrator), in the matter of Toys 'R' Us ANZ Limited (subject to DOCA) [2025] FCA 1135, her Honour also granted leave for the options on issue to be transferred to the DOCA proponent.
Comment
This decision confirms that section 444GA can be utilised to achieve a transfer of shares in circumstances where the transaction provides for value to be paid to shareholders. It also confirms that orders can be made for leave to transfer issued options. The manner in which this application was conducted reinforces the need for high quality independent expert evidence to be filed in support of section 444GA applications and the importance of conducting (and filing evidence of) an extensive sale process for the assets of the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
 |
 |
| Lawyers Weekly Law firm of the year
2021 |
Employer of Choice for Gender Equality
(WGEA) |
