RE ASTRON CORPORATION LTD

HCMP 698/2025

[2025] HKCFI 4659

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 698 OF 2025

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REASONS FOR DECISION

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Introduction

1.  By a petition dated 7 August 2025, Astron Corporation Limited (“Company”) seeks the Court’s sanction under section 673 of the Companies Ordinance (Cap. 622) of a scheme of arrangement (“Scheme”) between the Company and the Scheme Shareholders[1] to effect the redomicile of Astron Group’s holding company from Hong Kong to Australia (“Redomicile”). 

2.  The Scheme was approved by 99.9996% of the voting rights of the Scheme Shareholders present and voting, in person or by proxy, at the Court Meeting held on 30 July 2025.

3.  At the hearing, I sanctioned the Scheme.  These are the reasons for my decision.  This is not the first case in Hong Kong where a scheme of arrangement is used to effect a redomicile proposal, but previous cases involved cancellation schemes rather than transfer schemes[2]. This case also raises the question of whether the Scheme amounts to an “arrangement” between the Company and its members as by virtue of it being a transfer case the Company has a limited role in the Scheme.

Background

4.  The Company was incorporated in Hong Kong on 6 December 2011 and is the holding company of Astron Group, which principally engages in the exploration and development of mineral sands projects, the upgrading of mineral sand products into higher value products, and the development and application of technologies for the production of advanced materials and chemicals from mineral sands products.  The Astron Group has operations in Australia and China.

5.  The present domicile of the Astron Group in Hong Kong was established in 2012 by way of a scheme of arrangement since, at that time, the Astron Group was primarily engaged in mineral sands trading activities with a focus on the Chinese market.  By virtue of the scheme in 2012, the Company replaced Astron Limited as the ASX listed entity.

6.  The Astron Group’s principal assets and business activities now relate to the development of rare earths and mineral sands projects in regional Victoria, Australia.

7.  As the Company was incorporated in Hong Kong, its shares could not be traded directly on the Australian securities market. Instead, the Company was issued CDIs to have its securities cleared and settled electronically through CHESS.  Since 9 May 2012, the Company’s shares have been traded on the ASX in the form of CDIs.

8.  The Company has one class of ordinary shares (“Shares”).  The issued and paid-up share capital of the Company is comprised of 209,178,754 Shares.  99.9986% of these Shares are held by CDN, which is the legal entity that holds legal title to Shares on behalf of CDI Holders.  The CDN has correspondingly issued 209,175,747 CDIs, which are directly traded on the ASX, to the CDI Holders on a one-for-one basis.

Effects of the Scheme

9.  The effects of the Scheme are set out in the Explanatory Statement[3]. In gist:

(1)  A new company incorporated under the laws of Victoria, Australia on 28 March 2025 (“Aus NewCo”) will become the holding company of Astron Group and the Company will become a wholly-owned subsidiary of Aus NewCo.

(2)  The Scheme Shares will be transferred to Aus NewCo.  The Scheme CDIs will be cancelled in return for the issuance to the Scheme CDI Holders and the Scheme Shareholders (other than CDN) of two shares in Aus NewCo for every Scheme Share or Scheme CDI held by them in the Company.

(3)  The Scheme Shareholders and Scheme CDI Holders will hold Aus NewCo Shares directly (without CDN as an intermediary in respect of CDI Holders) with all voting rights and economic interest pertaining thereto.

Reasons for the Scheme

10.  The reasons for adopting the Scheme are set out in Chair’s letter and the Explanatory Statement[4]and may be summarised as follows:

(1)  It aligns with the Company’s identity as an Australian company, thus reducing barriers for shareholders, regulators, and the communities in which it operates.

(2)  It allows Securityholders to vote directly at shareholder meetings rather than through an intermediary.

(3)  It brings the Company’s shareholding structure in line with other Australian listed resources companies, which is expected to enhance Astron Group’s investment status and market confidence in its governance and reporting protocols.

(4)  It will streamline Astron Group’s compliance and governance arrangements.

(5)  It will reduce legal, administrative, and regulatory burdens and costs associated with Astron Group’s current domicile.

(6)  An Australian registration and listing is likely to improve the Company’s ability to attract quality employees and better address community interests.

(7)  The Redomicile is expected to enhance the Group’s ability to attract capital from Australian retail and institutional investors.

Principal Features of the Scheme

11.  As I have mentioned this is a redomicile scheme by way of transfer. It is similar in effect to that considered by the Court in Re Enice Holding Co Ltd^[5] although the mechanics of the privatisation scheme in Re Enice involved a cancellation scheme, whereas here there is a transfer of the Company’s Shares to Aus NewCo and cancellation of the CDIs.  A transfer scheme is a well-recognised type of arrangement for a scheme: Re Jelf Group Plc^[6] following Re Savoy Hotel Ltd[7].

12.  The differences between these two types of members’ scheme, and the reason why cancellation schemes, although once popular in the UK, have fallen into disuse, is explained by Professor Jennifer Payne in Schemes of Arrangement (2^nd ed) as follows:

“4.2.2.1. Transfer schemes and cancellation schemes

Member schemes can be used to add a new holding company in one of two ways:  by way of a transfer scheme or via a cancellation scheme.  A transfer scheme involves the members in the company that is proposing the scheme (oldco) transferring their shares in oldco to the new holding company, in exchange for shares in the new holding company in a predetermined ratio.  In a cancellation scheme the members agree to have their existing shares in oldco cancelled in consideration for the issue to them of shares in the new holding company, again in a predetermined ratio.  Of the two, cancellation schemes are far more common because they do not require the payment of stamp duty by the new holding company.”

13.  This represented the position in the UK prior to 2015 when Regulation S1472/2015 made under Companies Act 2006 prohibited the use of cancellation schemes to avoid the payment of stamp duty.  However, cancellation schemes are still the most common form of members’ schemes to effect takeovers and privatisations in Hong Kong.

14.  The mechanics of a transfer scheme is described by Professor Payne as follows:

“3.3.1.1. Until 2015 a takeover effected by a scheme of arrangement could occur in one of two ways: by a cancellation scheme or by a transfer scheme. A change in the law in 2015 [in the UK] means that only transfer schemes are now possible for this purpose. In a transfer scheme, the effect of a successful scheme is that all of the shares of the target not already owned by the bidder are transferred to the bidder. The only material steps to be taken by the target company are, typically, the registration of the bidder as shareholder in place of existing shareholders, and the issue of new share certificates to the bidder.

Even though the scheme provides for a transfer of shares, no contractual offer for those shares is made to the target shareholders by the bidder.  A scheme is a statutory mechanism whereby the members can agree to the proposal, put forward by the target board, that the target shares be transferred to the bidder on the proposed terms.  If the scheme is approved by the requisite majorities in the relevant meetings, and the court sanctions the scheme and the order is delivered to the Registrar, then all of the members are bound to transfer their shares in accordance with the terms of the scheme, even if they voted against it.  The bidder deals not with the target shareholders but with the target company.”

Whether the Scheme constitutes an “arrangement”

15.  Under the Scheme, the Company has a limited role.  All the company is required to do under a transfer scheme is to register the bidder (i.e. the Aus NewCo) in place of existing shareholders.  This is reflected in the relevant Scheme Clauses:

“1(c) For the purpose of paragraph 1(b)(i) above, the Scheme Shares shall be transferred to Aus NewCo by means of instrument(s) of transfer or such other form(s), instrument(s), instruction(s) or document(s) of transfer as may be required. To give effect to such transfer, from the Effective Date and until the completion of such transfers of Scheme Shares, each Scheme Shareholder shall be deemed to irrevocably authorise the Company to appoint any Director(s) as attorney and/or agent and/or otherwise, and any such Director as attorney and/or agent and/or otherwise shall be authorised on behalf of the relevant Scheme Shareholder to execute and deliver as transferor any such transfer document(s) of such Scheme Shares and every transfer document so executed shall be as effective as if it had been executed by the Scheme Shareholder thereby transferred.

…

4. With effect from the Implementation Date

(a) all certificates representing the Scheme Shares shall cease to be valid as documents of title to the Shares represented thereby and every holder thereof shall be bound, at the request of the Company, to deliver up such certificate(s) to the Company or to destroy the same;

…

(d) subject to the completion of such transfers, forms, instruments or instructions as may be required in accordance with paragraph 1 above, and the payment of any stamp duty in Hong Kong thereon, the Company and Aus NewCo shall make appropriate entries in their respective register of members to reflect (i) the transfer of Scheme Shares to Aus NewCo and (ii) the allotment and issuance of Aus NewCo Shares to Scheme Shareholders and Scheme CDI Holders, respectively.”

16.  The involvement of the Company is limited to authorising any director to act as attorney under Clause 1(c) and to register the transfer of the shares and for the Company to register the transfers under Clause 4(d).  This gives rise to the question of whether the Scheme constitutes an “arrangement” between the Company and its members.

17.  Section 668 of the Ordinance provides that an arrangement “includes a reorganization of the company’s share capital by the consolidation of shares of different classes, or by the division of shares into different classes, or both”.  An inclusive definition modifies the natural meaning of the defined term by enlarging it or clarifying potential doubt about what is covered: Bennion, Bailey and Norbury on Statutory Interpretation (8^th ed), at [18.3]. This justifies giving the term “arrangement” a broad interpretation; and this the English courts have done.  All that is required is some element of give and take between the company and its members as opposed to mere surrender or forfeiture. Beyond that the courts have taken the view that it is neither necessary nor desirable to attempt a definition of “arrangement”: Re Savoy Hotel[8] at 359D-F (Nourse J) (as he then was); Re Gategroup Guarantee Ltd (No. 1)[9] at [141] (Zacaroli J) (as he then was).

18.  It is implicit that an arrangement must be made with creditors or members of a company in their capacity as such and that it must at least concern their position as creditors or members of the company.  However, it does not need to materially affect the rights and obligations existing between the company and its members: Re T&N Ltd & Ors (No. 3)[10] at [45] (David Richards J) (as he then was); Re Savoy Hotel[11]at 361G-H.

19.  Re Jelf Group[12], concerned a scheme in relation to a take-over of the Jelf Group.  It was a transfer scheme.  Mann J was concerned that the involvement of the company was very limited.  First, that in certain limited circumstances it would receive consideration that could not be paid to a member.  Secondly, it would approve any modifications to the scheme.  Thirdly, it would register share transfers.  The question was whether this was sufficient to constitute an arrangement between the company and its members pursuant to section 895 of the Companies Act 2006.  Mann J, after reviewing the authorities cited to him, was satisfied that despite the limited level of participation of the company, the scheme still amounted to an arrangement between the company and its members and says this at [7]:

“7. Mr Horan drew to the summary of the jurisdiction contained in Re T & N Limited (No.3) [2007] 1 BCLC 563, a judgment of David Richards J (as he then was). David Richards LJ (as he now is) is, of course, a Judge with great experience of company law and schemes of this nature and he sets out in paras.49 and 50 the matter which demonstrate that the word “arrangement” is taken to be extremely broad in this context. At the end of para.50, he says this:-

‘As members’ schemes such as that in In re Savoy Hotel Ltd show, the give and take need not be between the members and the company, but may be between the members and a third party purchaser, with the company’s only function being to register the transfer of shares and thereby terminate the existing members’ status as members.’

It would not be right after all this time to undermine the clear understanding on which these transactions have taken place probably for decades.

8. Mr. Horan also draw to my attention the third edition of a book entitled Schemes, Takeovers and Himalaya Peaks written by Tony Damien and Mr. Andrew Rich and, in particular, footnote 39 on p.45 which sets out a large number of cases in which it is said transactions of this kind have been sanctioned by the court on the footing that they were arrangements.  Of particular significance is a citation from Lowe ACJ in Re International Harvester Co. of Australia Proprietary Limited [1953] VLR 669 (set out at p.47 of that book) in which he said:-

‘The word [arrangement] has been given a liberal meaning and, generally speaking, unless the arrangement is ultra vires or the company seeks to deal with a matter for which a special procedure is laid down or to evade a restriction imposed by the Act, almost any arrangement otherwise legal which touches and concerns the rights and obligations of the company or its members or creditors may come under [the section].’

That is a very important formulation which is said to be the summary of the jurisdiction, and this case brings itself within it.” (Emphasis added)

20.  Re Jelf Group[13]has been applied in subsequent transfer scheme cases where the courts confirmed that the company’s obligation to register the share transfer satisfied the “give and take” requirement: see Re Cardtronics Plc[14](Norris J) at [6]; Re Lakes Distillery Company Plc[15] (Hildyard J) at [43].

21.  The Australian courts have adopted a similar approach.  In Re Opes Prime Stockbroking Ltd[16], the Federal Court of Australia said:

“67. A purported scheme of arrangement must involve some arrangement in a sense that is to be construed liberally. No narrow interpretation should be given to the expressions ‘compromise’ or ‘arrangement’. An arrangement within the meaning of s 411 connotes some element of give and take. A proposal that conferred no benefit on creditors and constituted the mere confiscation of interests would not be an arrangement within the meaning of s 411. An arrangement must involve some bargain giving benefit to both sides. However, there is no reason to construe the term in s 411 as restricting in any way the nature of the bargain that might be made between company and creditors (Re Sonodyne International Ltd (1994) 15 ASCR 494 at 497-8), subject only to the additional requirement that the arrangement must be within the power of the company and not in contravention of the Corporations Act.

68. A scheme of arrangement between a company and its creditors or a class of creditors is no more than a proposal to vary or modify the company’s obligations in relation to its debts and liabilities owed to the creditors or class of creditors...

69. It is permissible to incorporate in a scheme of arrangement an involvement or participation by an outsider, being a person or entity who is not a party to the scheme as a company or creditor...Such arrangements are commonplace in relation to schemes involving takeovers. A scheme of arrangement made between a company and its creditors under s 411 binds only the company and the creditors. Nevertheless, there is no reason why a bargain might not be struck between a company and creditors whereby the creditors are bound to enter into an arrangement with third parties. So long as there is some element of give and take, such that the creditors receive something in return for the benefit conferred on a third party, there is no reason in principle why that term could not be part of a scheme of arrangement as contemplated by s 411.” (Emphasis added)

22.  In Hong Kong, Kwan J (as she then was) in Re Wah Nam Group Ltd (No. 2)[17] followed Re Savoy Hotel[18] and noted that the term “arrangement” has been treated “as being one of very wide import”.  She found that an “arrangement” implies some element of accommodation and “give and take” between the parties.  So long as the scheme involves an agreement modifying members’ rights, it may be regarded as an arrangement.

23.  I am satisfied that the Scheme involves the necessary element of give and take between the Company and its members and therefore falls within the meaning of “arrangement” under section 668 of the Ordinance.

Sanction of the Scheme

24.  In considering whether to sanction a scheme, the Court applies some well-established principles which I restated in Re Mason Group Holdings Ltd[19] at [4].  The Court will consider, in particular, the following factors:

(1)  Whether the scheme is for a permissible purpose;

(2)  Whether the members who were called on to vote as a single class had sufficiently similar legal rights such that they could consult together with a view to their common interest at a single meeting;

(3)  Whether the meeting was duly convened in accordance with the Court’s directions;

(4)  Whether members have been given sufficient information about the scheme to enable them to make an informed decision on whether or not to support it;

(5)  Whether the necessary statutory majority has been obtained; and

(6)  Whether the Court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of the class within which he voted might reasonably approve the scheme.

25.  First, it is well established that privatising a listed company is a permissible purpose for a scheme of arrangement: Re Mason Group[20] at [5]; Re AKM Industrial Co Ltd[21] at [4].

26.  Second, there is only one class of shareholders since all Scheme Shares are ordinary shares and the Scheme Shareholders have the same economic interests. As in Re Enice^[22], the Scheme will give “reflexive” effect to the rights of the Shareholders and CDI Holders equally.  They have sufficiently similar legal rights and could consult together with a view as to their common interest at a single meeting.

27.  Third, the Court Meeting was duly convened on 30 July 2025 in accordance with the Convening Order.  This appears from the Affirmation of Christopher Stojcevski dated 6 August 2025 which confirms the circulation of the notice of the Court Meeting and Explanatory Statement.

28.  Fourth, the Explanatory Statement is sufficient to enable the Scheme Shareholders to form a reasonable judgment on whether the Scheme is in their best interests (Re CIFI Holdings Group (Co) Ltd[23]at [51]).  It sets out the potential advantages and disadvantages of implementing the Scheme[24], the effects of the Scheme[25], the differences between Australian and Hong Kong laws[26], the implications if the Scheme does not proceed[27], and details of the Aus NewCo[28].

29.  Fifth, the Scheme was approved by 99.9996% in value of the Scheme Shareholders present and voting, in person or by proxy.  This is more than the majority required under section 674(2) of the Ordinance,which requires(i) support of at least 75% of the voting rights of the members present and voting, in person or by proxy; and (ii) the votes cast against the arrangement must not exceed 10% of the total voting rights attached to all disinterested shares.  There were no disinterested shareholders within the meaning of section 674(3)(a) of the Ordinance.  The Securities and Futures Commission also confirmed the Company is not subject to the Hong Kong Takeovers and Mergers Code as it is not a “public company in Hong Kong”.

30.  Sixth, I am satisfied that the Scheme is one which an intelligent and honest man might approve.  An overwhelming majority of shareholders voted in favour of the Scheme.  The Court is normally slow to differ from the conclusion of the majority in these circumstances as it acts on the basis that businessmen are much better judges of what is in their commercial interest than the Court: Re CIFI Holdings[29] at [55].

Conclusion

31.  For the above reasons, I sanctioned the Scheme and granted an order in terms of the draft produced to this Court subject to the amendments discussed with counsel at the hearing.