In Australia, under section 411(4)(a)(ii) of the Corporations Act 2001 (Cth), for a scheme of arrangement to be approved at the scheme meeting, it must meet two voting thresholds:
1. 75% of votes cast – At least 75% of the total number of votes cast at the scheme meeting must be in favor.
2. 50% in number of shareholders – More than 50% of the shareholders present and voting (in person or by proxy) must vote in favor.
Clarification: “50% in Number of Shareholders”
• This requirement is based on the number of individual shareholders (or proxies) who vote, not the number of shares they hold.
• Even if one shareholder owns 90% of the shares, they still count as only one shareholder for the purpose of this test.
• For example:
• If 100 shareholders vote at the meeting, at least 51 shareholders must vote in favor, regardless of how many shares they own.
Why Does This Rule Exist?
• It prevents a small number of large shareholders from pushing through a scheme that might not be supported by a majority of individual investors.
• It ensures that minority shareholders have a meaningful say in the outcome.
Potential Strategies & Risks for the Bidder
• If the bidder acquires many small parcels of shares, it could increase its number of votes under this test. However, ASIC and the Takeovers Panel may view this as an attempt to manipulate the scheme.
• If the bidder already has a large shareholder backing the scheme, it still needs to ensure that at least 50% of voting shareholders support it, which can be an issue in companies with many small retail investors.
Conclusion
The “50% in number” test is based on shareholder headcount, not shareholding size. This rule ensures broad support and prevents large shareholders from unilaterally controlling the vote.
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