NEWS & INSIGHTS

SPOTLIGHT ON LAW: GENERAL MEETINGS AND IMPROPER PURPOSE? THE KEYBRIDGE DECISIONS

There have been a series of Legal Decisions relating to the affairs of Keybridge Capital Limited (ASX: KBC) relating to solvency, the conduct of meetings and the appointment of Administrators. Here, we look at the issues of substance around the ruling.

First, some brief facts:

BACKGROUND

WAM Active Limited (WAM), a major shareholder of KBC (itself a financial services investment company), sought to challenge the appointment of a Voluntary Administrator to KBC

Following a series of disputes during 2024, a Section 249F General Meeting of Shareholders of KBC was convened for 10 February 2025, to consider resolutions to remove the Incumbent KBC Directors and to appoint new Directors nominated by WAM. The proxy votes indicated that the resolutions would be successful, and the Incumbent Directors would be removed.
On 9 February 2025, the day before the General Meeting, KBC received a letter of default regarding a loan from one of its majority owned subsidiaries, Yowie Group Ltd (Yowie). Two of the KBC Directors were also majority directors of Yowie.
The Directors discussed KBC’s financial position, considering its solvency, and the nominated Administrator suggested they obtain Kings Counsel’s advice on the appropriateness of an appointment.
Based on the material reviewed, Counsel considered that the Directors could reasonably appoint an Administrator, but that the motivation of the appointment must be its solvency, rather than to obstruct or delay the replacement of the KBC Directors with the WAM nominees.
The same day, on 9 February 2025, the KBC Directors appointed a Voluntary Administrator to KBC.
On 10 February 2015, KBC convened the General Meeting. The Chairman sought, without putting any resolutions to a vote, to adjourn the meeting to a later date, with details of the reconvened meeting to be provided ‘in due course’. WAM (as a shareholder) objected to the adjournment and purported to elect a new Chairman. The new Chairman read out the replacement resolutions and declared that they were passed.
The Administrator was present at the Meeting but did not participate.
On 11 February 2025 WAM seeks Court Declarations including that (a) as a result of the resolutions passed at the Section 249F Meeting, the Incumbent Directors were removed, and the Proposed Directors were appointed and (b) that pursuant to Section 447A or Section 447C of the Act, that the purported appointment of the Administrator of KBC was void, invalid and of no effect.
On 12 February 2025, WAM sent a letter to KBC with undertakings that WAM would provide funds to KBC to maintain its solvency, conditional upon the Incumbent Directors being removed as directors, and the Proposed Directors being appointed.

The KBC Decisions raise a number of issues around the independence of Administrators, the conduct of Meetings, and the appointment of Administrators for a proper purpose.

ISSUES RAISED

The matters in contention included:

Purported adjournment of Section 249F Meeting
- The initial chair of the meeting, had no power to adjourn the Section 249F Meeting
  The purported adjournment was not in good faith for a proper purpose.
- By reason of (1) or (2) above, the purported adjournment was invalid, the meeting proceeded and the Court should declare that the results are as have been declared by the replacement Chairman.
Purported appointment of Administrator
- The board of KBC did not properly and genuinely form the opinion that Keybridge was insolvent or was likely to become insolvent at some future time.
- The board of KBC purportedly appointed the voluntary administrator, for an improper purpose.
  Even if the appointment of the Voluntary Administrator was valid, the Court should order that the administration is to end under s 447A of the Act.

DECISIONS

A quick summary of the KBC Decisions, with links to the judgements, is set out below:

Date	Decision	Link
21 March 2025	The chairperson did not have the power to adjourn the General Meeting and consequently, the Meeting continued. The Incumbent Directors were removed (excluding one director) and the Proposed Directors were appointed. There were issues raised in relation to the administrator’s independence, noting previous experience working with KBC’s Incumbent Directors and a lack of impartiality regarding the Court proceeding	In the matter of Keybridge Capital Limited - NSW Caselaw
14 April 2025	Because WAM had the capacity to fund the proposed Bridging Facility, the Company was solvent, and the Administration could be brought to an end pursuant to Section 447A	In the matter of Keybridge Capital Limited (No 2) - NSW Caselaw
2 May 2025	Not all of the Administrator’s costs of the proceeding were “reasonably and properly incurred”, there should be a proportionate reduction in his right to be indemnified from Keybridge’s property, to reflect the extent to which his defence of the proceeding went beyond a position of neutrality. The Judge was satisfied that the Administrator adopted an appropriate position of neutrality from 3 March 2025 onwards. The Administrator should be entitled to be indemnified with respect to no more than 85% of his costs	In the matter of Keybridge Capital Limited (No 3) - NSW Caselaw

REFLECTIONS: CONDUCT OF MEETINGS

The Court found that the Chairperson did not have the power to adjourn the General Meeting and consequently, the General Meeting continued after the purported adjournment. The Court declared the result of the poll, that the Incumbent Directors were removed (excluding one director) and the Proposed Directors were appointed. We note from the Judgement.

It is generally accepted that a chairperson has no inherent power to adjourn a meeting in the absence of the consent of the majority of those present. That is subject to a limited number of exceptions, such as:
- where the chair cannot maintain order; or
- where the meeting place is not large enough to accommodate all those wishing to attend; or
- where a poll has been demanded and it is necessary to adjourn the meeting to enable the poll to be taken.

None of those exceptions was applicable here.

In the present case, the Chairman did not seek, or obtain, the consent of the majority of those present to an adjournment.
The general power of directors, under a corporate constitution, to manage the company and to exercise its powers does not allow the directors to postpone a duly convened general meeting. For the directors to be able to do that, there must be some express power in the constitution.
The issue therefore arises as to whether the chairperson adjourned the Section 249F Meeting pursuant to some express power in the Constitution permitting him to do so. The KBC Constitution stated, inter alia: The chairperson may at any time during the course of the meeting… adjourn the meeting or any business, motion, question or resolution being considered or remaining to be considered by the meeting either to a later time at the same meeting or to an adjourned meeting; …”
The chairperson did not adjourn the Section 249F Meeting “to a later time at the same meeting”. Nor did he adjourn it “to an adjourned meeting”, since there was no time or date nominated for the members to come together to resume the Section 249F Meeting. Instead, he merely indicated the meeting was “adjourned” and that the details for resumption of the meeting would be provided “in due course”.
The Judge concluded that the purported adjournment of the Section 249F Meeting was beyond the power conferred by rule 7.6(f)(1) of the Constitution.

Wexted covered Chairing meetings in a recent article:

In our years of experience, we have observed, attended, organised and chaired meetings of all shapes and sizes! Here, we consider key learnings associated with chairing a successful meeting.

READ NOW: Technical Top Tips | Meetings: Chapter 1 - The Chair | News & Insights

REFLECTIONS: SOLVENCY OF COMPANY

The Court was not satisfied that there was an improper purpose in appointing the administrator, or that but for any such purpose, a resolution to appoint an administrator would not have been passed on 9 February 2025.

In determining whether there was a proper basis for the directors to form the opinion that Keybridge was insolvent or likely to become insolvent, the Court had regard to circumstances including ongoing legal costs, ability to raise capital, outstanding debts and advice received from Kings Counsel. The Court was not satisfied that the appointment was for an improper purpose because:

Prior to the appointment, all of the Incumbent Directors had raised concerns about KBC’s solvency.
There was no basis for finding that two of the Incumbent Directors (who were also Yowie directors) orchestrated the demand from Yowie.
At least one of the Incumbent Directors wanted the general meeting to proceed but still voted for administration, meaning that it could not be said that but for the alleged improper purpose of frustrating shareholders’ rights the appointment would not have occurred.

Ultimately of course, WAM offered to and had the capacity to fund KBC, so it was solvent, and the Administration could be brought to an end pursuant to Section 447A. See some of our other recent articles for further context below:

Article 1:

The causes of failure in an organisation are complex, typically broken into internal and external factors. Today, we look at the internal factors that (although complex in practice) are relatively simple to identify and rationalise...

READ NOW: Diversions: I see nothing, I know nothing!! The internal causes of business failure

Article 2:

The appointment of an Administrator to a company is a serious development. Creditors and the public at large, are entitled to know that the process is sound, scrutiny is applied to ensure the appointment is for the correct purpose and reflects the standards applied to the insolvency industry.

READ NOW: Spotlight on law: Case Commentary - Accepting an appointment as adnimistrator

Case Commentary - appointing an administrator - verticle

REFLECTIONS: ADMINISTRATOR’ INDEPENDENCE

The Judgement has an extensive section on the issues giving rise to the Administrator’s independence. Some key points:

The Judge found that there were issues with respect to the Administrator’s independence, arising from his previous disputed dealings with KBC in respect of another liquidation, and that he did not, following his appointment and during the period when the Director Defendants were self-represented, adopt a position of neutrality in respect of the issues arising in these proceedings.
However, the Judge did not consider that those matters provide a sufficient basis to conclude that the Administrator and the Director came, prior to appointment, to some unspecified “understanding” regarding the Administration; with the result they held (unspecified) “expectations” about how an administration would proceed.
The Administrator obtained advice from Kings Counsel prior to accepting the appointment that there was ‘no ethical impediment’ on the administrator accepting the appointment, but noted the prior relationships would need to be disclosed.
The Administrator’s DIRRI disclosed his prior involvement and referred to Kings Counsel’s advice confirming that there was no impediment to him acting as Administrator.

However, the Court noted the Administrator had not taken a neutral position in the proceeding and assisted the Incumbent Directors in their defence of the proceedings.

Even if an administrator is in a position of conflict, this may not be sufficient to terminate the administration (as opposed to replacing the administrator). Ultimately the Keybridge administration was terminated on the basis of solvency.

Wexted covered the importance of Insolvency Practitioner independence in a recent article:

A recent case considered the implications of a Safe Harbour Advisor taking an Appointment as Liquidator and whether he should be “publicly admonished or reprimanded” for his conduct. Wexted reviews the case and findings.

READ NOW: Spotlight on law: Case commentary - Safe Harbour to Liquidator

CONCLUSIONS

The Judgements raise a series of interesting issues about the proper conduct of meetings, the connection between 447A and the objectives of Part 5.3A, the requirements of funding agreements, and (importantly) appointment and pre-appointment considerations and conflicts. Wexted note:

Taking an impartial approach the Chairing of a Meeting, and understanding meeting protocol is paramount;
Although the Judge determined the appointment was for a proper purpose, he was critical of the Administrator, who was at around the time of the appointment involved in an unrelated litigation with KBC;
While costs were awarded against the Defendant KBC Directors in favour of the WAM, the Administrators’ indemnity applied in relation to 85% of his costs. This re-enforces the need for Administrators to adopt a position of neutrality at all times.

Published 15th September 2025

By Joseph Hayes

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