VGW Holdings Limited, in the matter of VGW Holdings Limited (No 2)

VGW Holdings Limited asked the Federal Court to approve a scheme of arrangement under which it would become a wholly owned subsidiary of Ocean BidCo Limited, a Guernsey company. The transaction gave VGW shareholders a choice. The default position was cash for their shares, but shareholders could elect to receive scrip instead. The scrip alternative was one Ocean BidCo share for each VGW share, subject to a minimum holding requirement of 2,000 shares.

The structure was commercially significant because the judgment records that most VGW shares were owned or controlled by Laurence Escalante and associated persons, called the LEO Shareholders. They were to elect scrip consideration. So the deal was not simply a clean sale to an outsider. It was a restructuring in which the controlling group would continue through the new holding company, while many other shareholders would be cashed out.

The transaction also involved financial assistance. Some of the cash consideration was to be funded by a loan from VGW to a wholly owned subsidiary of Ocean BidCo. That meant a separate shareholder approval process was needed. A general meeting to approve the financial assistance and related party transaction was held immediately before the scheme meeting.

The case then took on a second layer. A shareholder company, Belleco Pty Ltd, wanted to oppose court approval of the scheme. But Belleco did not come to court through lawyers. Its director, Mr Hobson, who was not a lawyer, wanted to speak for it and had prepared written submissions. That created a threshold procedural fight before the Court even reached the approval question.

The judgment is easiest to understand if you separate the two issues.

Issue one was Belleco’s application to be heard. Belleco sought leave to be heard in the proceeding without becoming a party, and because it is a corporation, it also needed dispensation from the rule that a corporation may only proceed in the Federal Court by a lawyer. The Court said those two requests were inextricably linked. If Belleco could not be allowed to proceed without a lawyer, it would not be given leave to be heard in that way.

Issue two was the scheme approval itself. Once the Court dealt with Belleco’s application, it still had to decide whether to approve the scheme under s 411(4)(b) of the Corporations Act. That required the Court to consider the voting outcome, procedural compliance, disclosure, conditions precedent, ASIC’s position and the broader supervisory question of whether the proposal was one an intelligent and honest shareholder might approve.

That distinction matters for business readers. Belleco lost on the first issue because of representation, authority and evidentiary problems. VGW succeeded on the second issue because the Court was satisfied the statutory and discretionary approval requirements were met.

The Court accepted that Belleco’s position as a shareholder directly affected by the scheme was an important factor in its favour. This was not a case of a remote observer trying to intervene. Approval of the scheme would directly affect Belleco’s rights as a shareholder. Even so, that was not enough by itself to justify an exception to the usual representation rule.

The judge explained the rationale for requiring corporations to be represented by lawyers in superior courts. One reason is that courts rely on legally qualified representatives who have the skill to conduct litigation and who owe duties of candour and honesty to the court. Another reason is authority. A company cannot speak for itself, so the court must be confident that the person speaking for it is actually authorised to do so. The judgment stresses that this is not a mere technicality.

It is a matter of substance.

The Court also noted that the discretion to dispense with the rule is broad but must be exercised judicially. Special or exceptional circumstances are not required, but the company seeking dispensation must show sufficient reason why the general prohibition should not apply to it.

On the evidence, Belleco did not do that. Mr Hobson said Belleco lacked the financial resources to engage legal representation, but the supporting material was thin. The bank screenshot showed only a modest balance. The Court said that did not provide a satisfactory picture of Belleco’s financial situation because it said nothing about other assets, how readily they could be realised, or whether others standing behind Belleco could fund representation.

The Court then pointed to a practical problem in the evidence. VGW had recently paid two dividends totalling $0.45 per share. On the shareholding identified in the evidence, that may have produced $57,911.40 for Belleco, subject to unknown tax treatment. The Court did not say those funds definitely were available, but it did say Belleco had not explained what happened to that cash or why it could not be used to fund legal representation.

There was also an authority problem. During oral submissions, Mr Hobson confirmed he was not Belleco’s sole director. He candidly acknowledged that he could not assure the Court that the position he wanted to advance had been authorised by the company as a whole. That was a serious issue because one of the reasons for the representation rule is to ensure the person speaking for a corporation is properly authorised.

Mr Hobson also said Belleco held assets as trustee of a regulated superannuation fund, so those assets were not available to secure legal representation. The Court did not accept that proposition on the material before it. There was no evidence of the trust deed, and the judge observed that if opposing the scheme was a proper step in Belleco’s role as trustee, then on the face of things Belleco might be entitled to an indemnity out of fund assets for the legal costs.

The Court did not stop at the representation issue. It also looked at whether Belleco’s proposed submissions were likely to assist. That mattered because usefulness to the court is a relevant factor when deciding whether to allow a corporation to proceed without a lawyer.

The judge said large parts of Belleco’s written submission reflected a misapprehension of the Court’s role in a scheme approval hearing. One example was an attempt to raise questions about the correctness of the valuation of VGW shares used in Kroll’s independent expert opinion. The Court said its supervisory role was unlikely to extend to a detailed inquiry into the validity of the expert’s valuation methodology in the way Belleco appeared to suggest.

And even if such an inquiry were open, it would need to occur within the ordinary adversarial framework, with properly qualified expert evidence and submissions leading to findings of fact.

The Court also said many of Belleco’s arguments were unsupported by evidence and therefore unlikely to assist. That included concerns about potential conflicts of interest. The judge made the practical point that serious allegations of that kind should only be made where admissible evidence provides a proper basis. It is not enough for a person seeking to be heard to simply raise questions and invite the Court to investigate them.

The judgment is careful in tone. The Court said it did not mean to criticise Mr Hobson personally and acknowledged that he had clearly put substantial work into a detailed submission expressing sincerely held views. But the Court concluded that, on balance, it was unlikely to be assisted by Belleco being heard without legal representation.

For business owners, this part of the case is important. Courts do not treat a scheme approval hearing as an open-ended commercial review. If you want to challenge a scheme, you need a point that fits the Court’s supervisory role, and you need evidence that can support findings, not just concerns or suspicions.

After dismissing Belleco’s application, the Court turned to the scheme itself. The judgment repeats the standard principles for approval of a scheme of arrangement. The Court’s role is supervisory. It is not bound to approve a scheme just because it previously ordered a meeting to be convened, and it is not a rubber stamp. But it also does not usually override the commercial judgment of informed shareholders without good reason.

The central question is whether the proposal is fair and reasonable in the sense that an intelligent and honest shareholder, acting in their own interests as a member of the relevant class, might approve it. The Court also considers whether shareholders voted in good faith, whether there was full and fair disclosure of material information, whether minority shareholders would be oppressed and whether the scheme offends public policy.

The Court then checked the procedural and statutory matters. It was satisfied that ASIC had been provided with the scheme booklet and sealed convening orders, that the booklet was registered with ASIC, that notice of the scheme meeting and required materials were dispatched on time, and that delivery issues affecting a very small number of shareholders whose emails bounced back were corrected by hard copy dispatch no later than 7 July 2025.

The Court was also satisfied that notice of the second hearing was published on VGW’s website on 29 July 2025. It considered shareholder communications conducted through a shareholder information line and accepted evidence that scripts had been solicitor-approved for consistency with the scheme booklet. One shareholder had emailed questions directly to Mr Escalante about drag rights under the proposed shareholders’ deed for Ocean BidCo.

Mr Escalante referred the shareholder to another executive, who gave a detailed reply. The Court reviewed that email chain and was satisfied the response did not materially depart from information already in the scheme booklet.

The meetings themselves were also scrutinised. The general meeting approving financial assistance and the related party transaction was held immediately before the scheme meeting. The relevant resolutions passed with over 91% of votes cast in favour, and the LEO Shareholders did not vote. The Court treated that approval as an important condition precedent to the scheme.

The scheme meeting was then held in accordance with the earlier court orders. The scheme resolution passed with 91.31% of eligible votes cast in favour and 8.69% against. By headcount, 85.04% of shareholders present and voting supported it. The Court also noted the turnout was healthy and comfortably above any level that might raise concern about participation.

VGW tendered certificates showing that all conditions precedent to the scheme, other than court approval, had been satisfied or waived. ASIC provided a no-objection letter for the purposes of s 411(17). Those matters are often decisive practical milestones in a scheme approval application, and they were all present here.

The main substantive issue identified in the approval reasons concerned the independent expert’s opinion. The judgment records that Kroll considered the scheme fair and reasonable on the basis of cash consideration, but unlikely to be fair and reasonable on the basis of scrip consideration. That was an obvious point of sensitivity because the transaction offered both forms of consideration.

The Court did not treat that as fatal. Instead, it focused on disclosure and election mechanics. The judge said the issue had been adequately disclosed to shareholders and that the fair and reasonable form of consideration, cash, was the default option. Shareholders who wanted scrip had to make an active election.

On the published reasons available, that combination of disclosure plus active election was central to the Court’s conclusion that the proposal remained one that an intelligent and honest non-LEO shareholder might approve.

The Court also gave significant weight to the voting outcome. The resolution was passed by a substantial majority of non-LEO shareholders and with healthy turnout. The judgment says that weighed heavily in favour of approval. That reflects the usual approach in scheme cases: informed shareholders are generally better judges of their own commercial interests than the court, provided the process has been fair and the disclosure adequate.

The Court therefore approved the scheme under s 411(4)(b) and exempted VGW from compliance with s 411(11) in respect of the scheme. It also ordered VGW to lodge an office copy of the orders with ASIC by 4.00 pm AWST on 6 August 2025.

For businesses, the practical reading is straightforward. A strong vote helps, but it is not enough on its own. The Court still wants to see proper disclosure, proper meeting conduct, satisfaction of conditions and a coherent explanation of any features that may affect fairness, such as different forms of consideration.

This case is a practical reminder that court-approved transactions are won or lost on preparation. For the company proposing the scheme, the judgment rewards disciplined execution. The Court paid attention to dispatch dates, website notices, the handling of bounced emails, consistency of shareholder call scripts, the content of direct shareholder responses, meeting conduct, voting exclusions, conditions precedent and ASIC’s no-objection position.

Those are operational details, but in a scheme they are also legal details.

For shareholder companies considering opposition, the message is equally practical. Start with the threshold questions. Who has authority to act for the company? Can that authority be proved? If the company wants to seek an exception to the rule requiring legal representation, what evidence will show genuine inability to fund a lawyer rather than a commercial decision not to spend the money? A bare assertion and a bank screenshot may not be enough.

The case also shows the importance of framing objections properly. The Court is not conducting a free-ranging merits review of the transaction. It is supervising a statutory process. Objections that ask the Court to investigate valuation methodology, conflicts or fairness concerns without proper evidence may not assist. If the issue is serious enough to matter, it usually needs to be put in a form the Court can actually decide.

Finally, the judgment is a reminder that a shareholder who cannot be heard at the second court hearing is not necessarily left without any voice at all. The Court noted Belleco could express concerns to ASIC and could raise them with fellow shareholders at the meeting. In this case, however, the evidence was that no one present raised comments or questions when invited to do so at the meetings.

This page is based on the Federal Court’s reasons in VGW Holdings Limited, in the matter of VGW Holdings Limited (No 2) [2025] FCA 929. The reasons cover both Belleco Pty Ltd’s application to be heard and the Court’s approval of the scheme. The judgment also refers back to the earlier convening decision at [2025] FCA 715 for background on the scheme structure and the independent expert issue.

The available published text used for this note is truncated near the end of the approval reasoning. The key orders and the main reasoning are available, so the case can still be explained confidently at a practical level. This page does not go beyond what is clearly stated in those reasons.