Formula for success: schemes of arrangement and variable consideration

This week's TGIF considers In the matter of PM Capital Asian Opportunities Fund Limited  [2021] FCA 1380, a decision of the Federal Court that provides guidance on its approach to the supervision of schemes of arrangement, and specifically the role of the Court during the application to convene a meeting to consider a scheme.

Key Takeaways

• The Court's function at the convening hearing is primarily supervisory in nature and it will generally not usurp the shareholder's or creditor's commercial decision whether or not to approve the scheme.
  
  
• Proper and adequate disclosure of the nature and terms of a scheme in the scheme booklet is critical.
  
  
• The use of a variable consideration mechanism, where the final amount to be paid will not be calculated until a date after the scheme is approved, is acceptable when the formula for the calculation has been disclosed and when the timing minimises any disadvantage to the scheme participants.