Flexibility of schemes: Court permits a single voting class despite differential consideration and no independent expert report in Grant Thornton scheme

The Court also accepted that Grant Thornton did not need to commission an independent expert report or establish a shareholder information line. The decision illustrates the flexibility of section 411 of the Corporations Act 2001 (Cth) (Corporations Act) where a proposed scheme reflects existing commercial arrangements familiar to financially sophisticated participants in the relevant business who, directly or indirectly, hold all of the scheme shares.

The proposed transaction

In the matter of Grant Thornton Australia Ltd [2026] NSWSC 898 concerned Grant Thornton’s application under section 411 of the Corporations Act for orders convening a shareholder meeting to consider a scheme under which Fast Track Buyer would acquire the shares held by participating Grant Thornton shareholders.

Grant Thornton is an unlisted public company that provides audit, financial advisory, tax and other professional services in conjunction with a partnership that provides services to Grant Thornton and its associated entities. Approximately 99% of the shares the subject of the scheme were held by current Grant Thornton partners or their nominees. About 1% were held by Grant Thornton Consolidated Limited, which was itself owned by the relevant Grant Thornton partners. The consideration under the scheme was a mix of cash and scrip consideration, comprising limited partnership interests in Turbo Parent Partnership LP (Turbo LP), as determined by specified allocation principles set out under the scheme implementation deed, with several newly appointed Grant Thornton partners receiving only scrip consideration.

Why shareholders could vote as a single class

At the first Court hearing, Black J considered whether the Grant Thornton shareholders participating in the scheme could vote at a single meeting even though the amount of consideration and the proportions of cash and scrip they would receive for their Grant Thornton shares differed. The applicable test was whether the rights of those shareholders under the scheme were so dissimilar as to make it impossible for them to consult together with a view to their common interest. Black J accepted that the differences between the shareholders’ individual allocations did not prevent them from voting as a single class.

The consideration payable to each shareholder was calculated by applying the same allocation principles set out in the scheme implementation deed. Those principles reflected Grant Thornton’s existing dividend arrangements, under which shareholders’ dividend entitlements depended on remuneration principles involving differentiation, discretion and judgement. The scheme booklet explained how the allocation principles operated and, following amendments made during the first Court hearing, disclosed the ranges within which the cash and scrip allocations would fall.

On 16 June 2026, each eligible Grant Thornton shareholder received a letter setting out their indicative cash and scrip consideration allocations and the estimated aggregate value of their scheme consideration. Before the scheme meeting, each shareholder would also be provided with a further letter setting out their final individual allocations of cash and scrip consideration, subject to any adjustment payments required under the scheme implementation deed. Black J held that fair disclosure required each shareholder to be informed of the consideration they would receive and the basis on which it had been calculated, but not the individual allocations of every other shareholder. That information was sufficient to enable each shareholder to decide whether to vote in favour of the scheme, and if that shareholder did not accept that approach, then it was open to voting against the scheme on that basis.

Grant Thornton also proposed to tag each vote by reference to the relevant shareholder category. This would enable the Court at the second Court hearing to determine whether separate meetings would have produced a different result and to revisit the class-composition issue if necessary.

Why the Court accepted a more limited process in this case

Black J considered three aspects of Grant Thornton’s proposed process that departed from the practice commonly followed in listed-company schemes. Grant Thornton did not commission an independent expert report, did not establish a shareholder information line and did not disclose the amount and proportions of cash and scrip consideration that each Grant Thornton director would receive. The Court accepted each departure in the particular circumstances of the proposed scheme.

No independent expert report

Under regulation 5.1.01(1)(b), read with clauses 8303 and 8306 of Part 3 of Schedule 8 to the Corporations Regulations 2001 (Cth), an independent expert report was not legally required because Fast Track Buyer did not hold at least 30% of Grant Thornton’s voting shares and no person was a director of both companies.

Although companies commonly commission an independent expert report for a members’ scheme even when one is not legally required, Black J accepted that an independent expert report was not necessary in this case. Grant Thornton’s directors had significant experience in public-company management and professional services, while the shareholders were financially sophisticated and experienced professionals assessing a transaction involving the business in which they are engaged.

No shareholder information line

Grant Thornton also did not establish a shareholder information line. The participating shareholders were Grant Thornton partners, their nominees or entities owned by Grant Thornton partners and were familiar with Grant Thornton’s business and the arrangements informing the allocation of the scheme consideration. Black J accepted that a shareholder information line, which is not a prerequisite to convening a scheme meeting, was unnecessary in those circumstances.

Disclosure of the Grant Thornton directors’ interests

The disclosure of the Grant Thornton directors’ interests required closer consideration. Each Grant Thornton director who held Grant Thornton shares would receive scheme consideration calculated under the same allocation principles that applied to the other participating shareholders. The scheme booklet disclosed those principles but did not disclose the amount and mix of cash and scrip that each director would receive.

The scheme booklet separately disclosed other financial benefits that Grant Thornton directors might receive if the proposed scheme became effective. These included transaction bonuses that Grant Thornton might pay to certain employees, executives and partners, including Grant Thornton directors. The scheme booklet also disclosed the services deed to be entered into by Grant Thornton’s chief executive officer and that termination of his existing services agreement with Grant Thornton and the partnership would result in the pro rata vesting of his existing long-term incentive entitlements.

The scheme booklet expressly informed shareholders that the individual allocations of scheme consideration to the Grant Thornton directors had not been disclosed. It invited shareholders to consider whether that omission should affect their decision to vote for the proposed scheme. Each Grant Thornton director nevertheless considered it important and appropriate to provide shareholders with a voting recommendation.

Black J accepted, on balance, that the disclosed allocation principles and additional financial benefits, together with the financial expertise of the Grant Thornton shareholders, provided sufficient information for the directors to recommend the proposed scheme. His Honour confined that conclusion to the circumstances of the proposed Grant Thornton scheme and observed that the non-disclosure of each director’s individual allocation would likely be unacceptable in a listed-company scheme.

Post-implementation incentives did not require a separate class

The proposed transaction also included incentive arrangements for certain Grant Thornton partners and employees. Fast Track Buyer and Turbo LP agreed to make an Australian incentive allocation available after the scheme was implemented. An initial allocation with an aggregate notional value of A$31 million would be made to 83 eligible Grant Thornton shareholders on or around implementation of the scheme. The notional value of each allocation ranged from approximately A$25,710 to A$2 million, with an average allocation of approximately A$186,803.

The class-composition issue was whether the opportunity to participate in the Australian incentive allocation gave the eligible Grant Thornton shareholders a different interest in the proposed scheme from the other Grant Thornton shareholders. Black J accepted that the incentive allocation formed part of a post-implementation incentive pool for partners and employees and was not part of the consideration payable for the acquisition of the recipients’ Grant Thornton shares. The actual economic value of the incentives was also uncertain and was expected to be significantly lower than their notional value. The eligible Grant Thornton shareholders therefore did not need to vote in a separate class.

Although the Australian incentive allocation did not form part of the scheme consideration, it was disclosed in the scheme booklet. Black J left open its relevance at the second Court hearing. A benefit offered to selected shareholders may therefore be sufficiently separate from the scheme consideration not to require a separate voting class, while remaining relevant to the Court’s assessment of fairness when deciding whether to approve the scheme at the second Court hearing.

Practical implications and limits of the decision

The decision confirms that differences in the amount or form of scheme consideration, and benefits provided outside that consideration, do not necessarily require separate voting classes where the context, including the shareholder base, justifies the departure. It does not create a general exception from the ordinary class-composition, disclosure or fairness requirements applying to schemes of arrangement and the approach accepted in the proposed Grant Thornton scheme should not be assumed to apply to a listed-company scheme involving a broader investor base.

Black J’s reasons concern only the first Court hearing, at which the Court decided that the proposed scheme was fit to be considered by Grant Thornton shareholders. The Court retained the ability at the second Court hearing to revisit the composition of the voting class and consider the relevance of the Australian incentive allocation when determining whether the scheme should receive Court approval.

ASIC accepted that section 411 of the Corporations Act can accommodate different amounts or forms of consideration and benefits provided outside the scheme consideration where those differences are adequately disclosed and are not substantively unfair in the particular case. ASIC nevertheless warned that material differences among shareholders voting in a single class and the absence of an independent expert report would likely raise significant concerns in a scheme involving listed securities and a broader investor base, including concerns about possible avoidance of the policy underlying Chapter 6.

The outcome did not depend on the financial sophistication of the Grant Thornton shareholders alone. The allocations were determined under common principles derived from Grant Thornton’s existing dividend and remuneration arrangements, each shareholder was informed of their own consideration, benefits provided outside the scheme consideration were disclosed, and votes would be tagged by shareholder category.

The decision provides a useful reference point for professional services businesses considering transactions that must accommodate existing differences in partners’ dividend, remuneration or ownership arrangements and demonstrates the inherent flexibility of schemes of arrangement.

Companies considering a similar transaction should identify any differences in scheme consideration and any additional benefits at an early stage. They should assess the implications for voting classes, shareholder disclosure and the Court’s consideration of fairness. Where shareholders with different economic outcomes vote at a single meeting, their votes should be tagged by category so that the Court can be in a position to assess whether the convening of separate meetings of shareholders would have produced any different result at the second Court hearing.