Cannatrek Ltd, in the matter of Cannatrek Ltd [2026] FCA 246

This case arose from a proposed merger between Cannatrek Ltd and Little Green Pharma Ltd, or LGP. Cannatrek was an unlisted public company operating in the medicinal cannabis supply chain. The Court said its business included GMP-certified manufacturing, a medicinal cannabis clinic and a distribution business. LGP was described as a global medicinal cannabis and psilocybin company with operations in Australia and Europe, and it had been listed on the ASX since February 2020.

On 14 January 2026, Cannatrek announced that it had entered into a Scheme Implementation Deed with LGP. The transaction was to be carried out by a scheme of arrangement. Cannatrek then applied to the Federal Court for orders under section 411(1) of the Corporations Act so that its members could meet and vote on the proposal.

This was not a hostile dispute or a damages claim. It was a first hearing in a court-supervised transaction process. At this stage, the Court's job was to decide whether the proposal could properly be put to shareholders and whether the meeting and notice arrangements should be approved.

The judgment records that, if the scheme were approved and implemented, LGP would acquire all of the ordinary shares in Cannatrek. The consideration was a securities package rather than a simple cash payment. Scheme shareholders, other than ineligible foreign shareholders and unmarketable parcel shareholders, were to receive 1.835806 new ordinary shares in LGP and 0.727502 new convertible and redeemable preference shares in LGP for every Cannatrek share they held.

That detail matters. Share-for-share transactions can be harder for shareholders to assess than cash deals because the value and rights attached to the consideration may depend on the terms of the securities being issued, future conversion features and the post-transaction capital structure. The Court also noted that Cannatrek members would collectively hold a majority interest in LGP immediately after implementation, stated as 62.6% or 60.3% on a fully diluted basis, with potential for that interest to increase further depending on future conversion of the new securities.

As at 23 January 2026, Cannatrek had 950 members and 276,639,435 ordinary shares on issue. That shareholder base helps explain why the meeting and dispatch mechanics were dealt with in detail. A transaction involving hundreds of members needs a process that is clear, workable and capable of being evidenced to the Court.

The legal issue at the first hearing was whether the statutory prerequisites for a convening order had been met and whether the Court should exercise its discretion to order a meeting of Cannatrek shareholders. The Court was not yet deciding whether the scheme should be finally approved. It was deciding whether the proposal was fit to go to members and whether the meeting process was appropriate.

The evidence before the Court included affidavits from Cannatrek's solicitor, Chaim Kingsley, and Cannatrek's chairperson, Brent Dennison. Those affidavits dealt with the scheme, the verification process for Cannatrek information in the scheme booklet, and the proposed meeting arrangements. There was also evidence from LGP's general counsel and company secretary, Alistair Warren, about the verification of LGP information in the scheme booklet, the deed poll executed by LGP in favour of scheme shareholders, and his awareness of the conditions precedent in the Scheme Implementation Deed.

The Court also had evidence about a late development. On 26 February 2026, LGP announced that it had converted 210,000 unlisted securities that had vested on 20 February 2026 into ordinary shares. That required minor amendments to the scheme booklet and the independent expert report. This is a useful reminder that even a relatively contained change in securities on issue can require updates to transaction documents and explanatory materials.

ASIC's position was also important. The Court noted that ASIC had been given at least 14 days' notice of the hearing, had a reasonable opportunity to examine the terms of the proposed scheme and the draft explanatory statement, and had written on 2 March 2026 to say it did not propose to appear or intervene to oppose the scheme at the first hearing.

Justice Neskovcin made the convening orders sought on 3 March 2026 and later published reasons on 13 March 2026. The Court ordered Cannatrek to convene and hold a scheme meeting on 10 April 2026 at the offices of K&L Gates in Melbourne, commencing at 9.30 am Melbourne time, with online accessibility.

The orders set out detailed dispatch arrangements. On 4 March 2026, Cannatrek was to send materials to shareholders appearing on its register as at that date. Email shareholders were to receive an email containing a link to the final scheme booklet, subject to ASIC registration under section 412(6), together with instructions for online proxy voting. Shareholders who were not email shareholders were to receive a posted cover letter with the electronic address for the final scheme booklet, a personalised hard copy proxy form and a reply-paid envelope. If an email to an email shareholder failed, Cannatrek had to use the postal process.

The Court ordered that the meeting be convened, held and conducted in accordance with Part 2G.2 of the Corporations Act, subject to any displaced or modified replaceable rule, Cannatrek's constitution to the extent not inconsistent with Part 2G.2, and the attendance, participation and voting arrangements described in the notice of scheme meeting. The Court also ordered that Cannatrek did not need to send the meeting documents to anyone who became a shareholder after the record date for dispatch.

The voting mechanics were specific. Eligible voters were those recorded in Cannatrek's register at 7.00 pm AEDT on 8 April 2026. Voting on the scheme resolution had to be by poll. A proxy form was valid only if completed and delivered by 9.30 am AEDT on 8 April 2026. The Court also made a tailored proxy order under the Federal Court (Corporations) Rules 2000. A shareholder's attendance and participation at the meeting would not, by itself, revoke or suspend the proxy appointment. But if that shareholder voted on a resolution, the proxy could not vote on that resolution for the shareholder and any such proxy vote had to be excluded from the poll result.

The Court appointed Brent Dennison, or failing him Paula Butler, as chair of the scheme meeting. The chair was given power to postpone or adjourn the meeting, with corresponding rules for voter eligibility and proxy timing if that happened. The Court also dispensed with compliance with certain procedural requirements under the Federal Court (Corporations) Rules 2000, namely rules 2.4(1), 2.15, 3.4 and Form 6. In addition, Cannatrek was ordered to publish a notice on the specified Boardroom webpage, and that notice had to be published at least 5 days before the hearing of any application to approve the scheme. The proceeding was adjourned to 21 April 2026 for the hearing of any approval application.

One of the most useful features of this judgment is how clearly it shows the court's focus on process. The affidavits did not just describe the commercial transaction. They also addressed the verification process for the information in the scheme booklet, the deed poll in favour of scheme shareholders, the meeting logistics and the effect of changes in LGP's securities on issue. That is the kind of evidence the Court expects in a first hearing application.

For directors and company secretaries, the message is practical. If you are asking members to vote on a major transaction, your explanatory materials need to be internally checked and consistent with the current capital structure. If there is a late change, even one that seems modest, you may need to amend the booklet and related expert material before dispatch. The Court's reasons show that this happened here after LGP converted 210,000 unlisted securities into ordinary shares.

The orders also show that meeting administration is not treated as a minor afterthought. The Court dealt with the dispatch date, the shareholder record date for dispatch, the voting entitlement date, the proxy deadline, the requirement for a poll, the effect of a shareholder attending after appointing a proxy, the identity of the chair, the power to adjourn, and the online publication of notice before the second hearing. In a transaction with hundreds of members, those details are part of the legal architecture of the deal.

Most businesses will never run a court-approved scheme of arrangement. But the governance lessons from this case travel well beyond listed-company style transactions. When ownership is changing in a major way, the legal risk often sits in process rather than in the headline commercial terms. A board may have negotiated a sensible deal, but if the shareholder communications are inaccurate, the register is not current, or the voting mechanics are unclear, the transaction can become slower, more expensive and more vulnerable to challenge.

This case is especially relevant for founder-led companies, growth businesses and companies with multiple investor cohorts. If your company has ordinary shareholders, preference holders, employee equity participants or offshore investors, you need to understand early how the transaction will be explained and how the vote will be run. The Court's orders here show the level of precision expected when the matter reaches a formal approval stage.

It is also a reminder that hybrid communication methods may be necessary. Cannatrek was permitted to use email dispatch for shareholders who had nominated an electronic address or elected electronic communications, but there was also a postal pathway for other shareholders and a fallback postal process if an email bounced. Businesses should not assume one communication channel will suit every register.

Finally, remember what this decision does and does not say. It shows that Cannatrek cleared the first hearing and was allowed to put the scheme to shareholders. It does not, by itself, tell us whether the scheme was later approved at the second hearing or implemented. So the case is best read as a guide to first hearing preparation and meeting mechanics, not as a complete end-to-end account of the transaction.

Is a first hearing just a formality? No. The Court still checks whether the statutory prerequisites have been met and whether the meeting process is appropriate.

Does ASIC's non-opposition mean the scheme is approved? No. It means ASIC did not propose to oppose the scheme at the first hearing. Final approval, if sought, is a separate step.

Why did the Court care about proxy mechanics? Because voting integrity matters. The orders had to make clear how proxies worked, when they were due and what happened if the appointor attended and voted.

Why was online publication ordered? The Court required publication of notice on the specified webpage at least 5 days before the hearing of any application to approve the scheme, helping ensure public notice of the next stage.

What is the practical lesson for private companies? Even outside a formal scheme, major ownership changes need accurate records, verified communications and a voting process that is clear and defensible.