Qoria Limited, in the matter of Qoria Limited [2026] FCA 676

Qoria asked the Federal Court to make the usual first-hearing orders for a scheme of arrangement so its shareholders could vote on a proposed merger with Aura. The deal was not a straightforward cash acquisition. Qoria shareholders were to receive interests in Aura, a US company, through CHESS depositary interests quoted on the ASX. The transaction also depended on Aura being admitted to the ASX and completing a US$100 million capital raise.

That structure meant the court had to look carefully at the mechanics of the proposal. It had to consider whether the arrangement was one that could proceed under Part 5.1 of the Corporations Act, whether all Qoria shareholders could vote in a single class, whether the explanatory materials were sufficient, and whether the proposal should still go to shareholders even though the independent expert concluded the scheme was not fair but was reasonable.

Jackson J made orders convening the shareholder meeting for 2 July 2026. The proceeding was then adjourned to 7 July 2026 for any later application to approve the scheme if the shareholder vote succeeded. That procedural sequence matters. This judgment is about whether shareholders should be allowed to vote on the proposal, not whether the merger was finally approved.

At a first scheme hearing, the court does not usually decide whether the transaction is attractive in the way a board, investor or bidder might. Its task is narrower. It checks whether the statutory and procedural requirements for convening the meeting have been met and whether shareholders will have enough information to make an informed decision.

In Qoria, the court identified the central matters in the usual way. Qoria had to be a Part 5.1 body. The proposed acquisition of all Qoria shares had to be an arrangement within the meaning of section 411. The meeting had to be constituted by the correct class of members. The scheme booklet had to provide proper disclosure. The scheme had to appear bona fide and likely to be capable of approval at a second hearing, assuming it was unopposed. ASIC also had to be given the required notice and a reasonable opportunity to examine the scheme and booklet and make submissions.

The judgment expressly says that two of the central considerations were proper disclosure in the scheme booklet and whether the scheme was bona fide and likely to be approved at a second hearing if unopposed. That is a useful reminder for directors. The first hearing is not just a filing exercise. It is where the court tests whether the process is sound enough for shareholders to be asked to decide.

A recurring issue in scheme cases is whether different groups of security holders need to vote separately. Separate classes may be required if their rights are so dissimilar that they cannot sensibly consult together with a view to their common interest. In this case, the court accepted that there would be only one class of Qoria shareholders voting at the scheme meeting.

The reason was that all Qoria shareholders had the same right to receive the scheme consideration. The fact that ineligible foreign shareholders would have their entitlements sold through a standard sale facility did not create a separate class. Nor did the treatment of holders of small unmarketable parcels. Jackson J relied on authority that these kinds of standard sale processes are not class creating.

For businesses, this is one of the most practical parts of the decision. Different administrative outcomes do not automatically mean different legal classes. But that does not remove the need for careful analysis. If a transaction gives materially different rights or burdens to different groups, separate classes may still be required. The point is that the analysis turns on legal rights and practical interests under the scheme, not just on whether some holders are dealt with through different mechanics.

The court worked through Qoria's other securities in detail because they can complicate a scheme. Qoria had unlisted director options, performance rights, warrants held by Ashgrove Capital and deferred consideration rights issued in connection with an earlier acquisition. The question was whether any of these instruments created separate interests that would affect the class composition for the shareholder vote.

The court was satisfied that they did not. The non-executive director options would automatically vest on 30 June 2026 and be converted into Qoria shares before the scheme record date. Options held by Qoria's managing director, Tim Levy, would vest on a change in control, including approval of the scheme. Some of those options would be converted into Qoria shares before the record date, while the balance could either be exercised conditionally or cancelled under a replacement arrangement for equivalent vested Aura options. Because the options would be exercised or otherwise terminated by arrangements operating outside the terms of the scheme itself, they were not class creating.

The same approach was taken to performance rights. Some would automatically vest on a change of control and could either be exercised into Qoria shares or cancelled in exchange for equivalent Aura performance rights. Others would not automatically vest, but Qoria intended to ask those holders to enter cancellation deeds in exchange for equivalent Aura performance rights. If those steps did not occur, the rights would lapse for nil consideration at or around the scheme record date. On that basis, the court held they were not class creating.

The warrants held by Ashgrove Capital would either be exercised or replaced by equivalent Aura warrants under a replacement instrument. The deferred consideration rights would automatically vest on court approval of the scheme, and the holders were contractually obliged to exercise them before the scheme record date, converting them into ordinary Qoria shares. Again, the court was satisfied these rights were not class creating.

This part of the judgment is especially useful for startups and scaleups. If your cap table includes employee incentives, founder options, lender warrants or contingent rights from earlier acquisitions, you need a clear plan for each instrument. The court will expect to see how each one is treated and why that treatment does or does not affect the voting class.

The court reviewed the draft scheme booklet and said it struck an appropriate balance. That phrase is important in scheme practice. Shareholders need enough information to make a real decision, but the material also needs to remain comprehensible. Too much detail can make a booklet less useful rather than more useful. Jackson J was satisfied that the booklet gave shareholders the information they needed in a commercially realistic way.

The court did, however, require an amendment to make it clear that Aura itself was not listed on any stock exchange. That mattered because the consideration involved Aura CDIs to be quoted on the ASX, and shareholders needed to understand exactly what they would be receiving. The judgment also records that the listing of Aura CDIs and receipt of the capital raising funds were each conditions precedent to implementation, and that those matters were disclosed in the booklet.

The court also dealt with a practical disclosure issue about the exchange ratio. Because of the formula used to calculate the consideration, it was not possible at the first hearing to state the final ratio with precision. The court accepted that this was not fatal because the ratio would be known and announced by the time of the scheme meeting. On that basis, shareholders would still be able to make an informed decision.

The independent expert report was a major feature of the case. Grant Thornton concluded that the scheme was not fair but reasonable and therefore in the best interests of Qoria shareholders in the absence of a superior alternative proposal. The judgment explains that the not fair conclusion followed from the methodology required by ASIC Regulatory Guide 111, which compares the value of the target shares before the transaction on a control basis with the value after the transaction on a minority basis. Grant Thornton's valuation ranges showed a lower value after the scheme than before it on that methodology.

Even so, the expert also identified qualitative factors supporting the transaction and concluded that, taking those matters into account, the scheme was reasonable overall. Jackson J referred to earlier authority and confirmed that a scheme may be not fair in that technical valuation sense but still be reasonable because of other factors. At the first hearing, the court's concern was whether the report properly informed shareholders of its conclusion and the reasons for it. The court was satisfied that it did.

Just as importantly, the court said there may be cases where a scheme is so obviously unfair or unreasonable that it should not be put to shareholders. But this was not one of them. Jackson J was satisfied that the report set out Grant Thornton's reasoning clearly and with apparent thoroughness, and that shareholders would be able to make a suitably informed decision about their own commercial interests on the basis of the report and the rest of the booklet.

The judgment also shows the procedural discipline expected in a scheme application. ASIC received notice of the hearing on 12 March 2026, satisfying the 14 day notice requirement. The first draft of the scheme booklet was served on ASIC on 8 May 2026, with later versions provided after that. ASIC gave a letter confirming that it had had a reasonable opportunity to examine the terms of the scheme and the draft booklet and to make submissions. ASIC did not appear at the first hearing or seek to make submissions, although the judgment notes that some amendments appear to have been made in response to ASIC comments.

The orders dealt in detail with the mechanics of the meeting. The scheme meeting was set for 2 July 2026 at 10.00 am AWST in Perth. The voting time was fixed at 5.00 pm AWST on 30 June 2026. Voting was to be by poll. Proxy forms, appointments of corporate representatives and powers of attorney had to be lodged by 10.00 am AWST on 30 June 2026. The orders also covered dispatch of materials by email or post depending on each shareholder's communication election, publication of an ASX announcement, and lodgement of the orders with ASIC as soon as practicable.

The court dispensed with some procedural requirements under the Corporations Rules, including the newspaper publicity requirement for the later approval application. That is a reminder that scheme timetables are tightly managed and that procedural orders are tailored to modern communication methods, but only if the court is satisfied that shareholders will still have a reasonable opportunity to participate.

For business owners, the broader lesson is not that every transaction needs a Federal Court process. It is that complex deals succeed or fail on preparation. If your company has a messy cap table, foreign investors, employee incentives, lender warrants or contingent rights from earlier acquisitions, those issues need to be mapped early. If your consideration is unusual, your disclosure needs to be especially clear. If your expert report contains a mixed conclusion, your communications need to explain it in plain language rather than hoping the headline will speak for itself.

Qoria should also be read with one important limit in mind. The court's acceptance of the expert's not fair but reasonable conclusion was specific to the first-hearing stage. The court was deciding whether shareholders should be allowed to vote on an adequately explained proposal. It was not deciding that the transaction was finally justified or that final approval would inevitably follow.

The orders were made on 27 May 2026 and the reasons were published on 29 May 2026. The scheme booklet was to be registered with ASIC and dispatched by 2 June 2026. The shareholder meeting was ordered to be held on 2 July 2026, with the proceeding adjourned to 7 July 2026 for any later application to approve the scheme if the vote succeeded.

This means the judgment sits at the first-hearing stage only. It records the court's reasons for allowing the proposal to go to shareholders. It does not itself record the shareholder vote outcome or any later second-hearing approval decision.