Sometimes an investor needs the company, not its assets: the licences, the contracts, the accreditations, the tax attributes. Section 444GA of the Corporations Act lets a deed administrator transfer shares with the leave of the court, over the objection of existing shareholders. It is the mechanism that turns a deed into a recapitalisation. It is also four to six months and expensive, and it belongs in the plan from day one.
Most distressed transactions are asset deals, and for good reason. Buy the assets, leave the liabilities, start clean. It is faster, simpler and it is what the market does by default.
But some businesses cannot be bought that way. A construction company whose licence is held by the entity. A labour hire business whose accreditations do not transfer. A group whose head contracts contain change of control provisions that a counterparty will use as leverage. A company carrying tax losses that are worth more than the plant, or more importantly where the assets and leases to be transferred are significant and the transaction costs of the Deed or less than the transaction costs of the asset transfer.
That is where section 444GA comes in, and it is the least understood provision in Part 5.3A.
What section 444GA permits
Under a deed of company arrangement, the deed administrator may transfer shares in the company if the owner of the shares consents in writing, or if the court gives leave.
It allows an investor to acquire the entity itself, at the price the deed provides for, without needing the agreement of the existing shareholders. In a company where the equity has no value, that is a rational outcome. The shareholders are being asked to give up something that is worth nothing, in a transaction that improves the return to creditors.
It is not automatic. The court has to be persuaded on the evidence
The test: unfair prejudice, and the residual value question
The court may only give leave if it is satisfied the transfer would not unfairly prejudice the interests of members. That is a precondition rather than a guarantee: satisfy it and the court still has a discretion. In practice the question collapses into a narrower one, is there any residual value in the shares?
The reasoning is straightforward. If the company's liabilities exceed the realisable value of its assets, and a winding up would return nothing to shareholders, then shareholders lose nothing by the transfer. It is difficult to be prejudiced by the loss of something that has no value.
In Fitzroy River Limited Liability Company v Tucker [2025] WASCA 118, the Western Australian Court of Appeal dismissed a shareholder's appeal against a section 444GA transfer. In that instance the administrators' valuation of the principal asset was held to be inadmissible and of no probative value, because the comparable sale prices it relied on were not themselves proved by admissible evidence. The transfer was upheld anyway, on other evidence that liabilities far exceeded assets and there was no reasonable prospect of the shares having value.
Two things follow for anyone running one of these applications. Where a valuation is relied on, it has to be admissible evidence in court and factually supported or it is worth nothing. The court also treats unfair prejudice as a high bar where creditors have approved the deed and the alternative is liquidation where shareholder value is nil.
The independent expert report
The centre of the application is an independent expert report on the value of the shares. It has more than one audience, which is why it cannot be a desktop exercise.
- The court, which needs admissible evidence it can act on
- ASIC, which will be considering relief and will read the report
- Members, who are being divested and are entitled to understand why
- Creditors, who are being asked to approve a deed built on the same assumptions
The report is prepared to the content standards in ASIC Regulatory Guide 111, by an expert who satisfies the independence requirements in Regulatory Guide 112. It cannot be the administrator or a member of the administrator's firm, and that is one of the most common ASIC objections in these matters. Where the company is insolvent, the valuation will generally be prepared on a liquidation basis, because that is the counterfactual against which prejudice is assessed.
Weak expert evidence is the most common reason these applications become difficult. A report that assumes the answer, or that values the business rather than the shares, invites exactly the challenge the process is designed to withstand.
ASIC relief
A transfer that takes an investor above the takeover threshold engages Chapter 6 of the Corporations Act. In most section 444GA transactions, relief from the takeover provisions is sought from ASIC, and the expert report is part of what supports that request.
ASIC relief and the court application run in parallel rather than in sequence, and both take time. Building the timetable as though one follows the other is how a four month process becomes an eight month one.
The sequence
A typical uncontested matter runs roughly like this:
- Voluntary administrators appointed. Sale and recapitalisation process commences.
- Binding offers received. The deed proposal is built around the successful proposal.
- Creditors approve the deed at the second creditors' meeting.
- The deed is executed within 15 business days of the meeting, or such further period as the court allows.
- Independent expert engaged and the valuation prepared.
- ASIC relief application lodged.
- Section 444GA application filed, with the expert report circulated to members, creditors and ASIC.
- Court orders made, ASIC relief granted.
- Distributions to creditors, shares transferred, deed effectuated.
Creditors vote and the deed is executed before the court application is heard. That is deliberate: the deed is the vehicle that gives the administrator the power to transfer under section 444GA in the first place. It also means the fifteen business day execution deadline under section 444B(2) applies while the rest of the transaction is still being assembled. Where anything in the transaction cannot be delivered inside that window, the extension needs to sought from the court before the period runs, not after.
Time and cost
Published practitioner estimates for a straightforward, uncontested matter run to four to six months from appointment to effectuation, and $500,000 to $750,000 plus GST across insolvency, legal and expert fees. A contested application, a foreign investment approval requirement or a disputed valuation moves both numbers materially, so the transaction being protected needs to be materially justified by the cost.
Those figures are not a reason to avoid the structure. They are a reason to price it into the transaction at the outset.
What goes wrong
Four failure modes account for most of the trouble we see in these transactions, and all four are avoidable.
The expert report is commissioned late
The valuation is the case. Commissioning it after the creditors' meeting, when the fifteen business day execution clock is already running and the court timetable is being set, compresses the one piece of work that should not be compressed. Engage the expert while the proposal is being built.
The sale process was not competitive enough to be evidence
A process run to two known parties over three weeks may find the right buyer and still fail to prove that the equity has no value. If a section 444GA transfer is in contemplation, the sale process needs to be designed with the court in mind as well as the market: documented approach lists, recorded outcomes, and a clear account of why no offer implied value above the debt.
A sale process tests the market in a distressed environment under set of particular circumstances it does not in of itself prove there is no value to shareholders.
Members find out from the court documents
Members who are being divested of their shares are entitled to understand why, and a member who first learns of the proposal from an originating process is a member more likely to appear. ASIC expects members to receive the explanatory statement and the expert report at least 14 days before the leave hearing, which sets the practical deadline. Communication does not guarantee acquiescence, but silence reliably produces the opposite.
The timetable assumes things run in sequence
ASIC relief, the expert report, the court application and the deed obligations all have their own clocks, and they overlap. Build the timetable as a critical path with the section 444B date fixed at the front of it, and identify at the outset anything that cannot be delivered inside fifteen business days.
What the investor should ask for before committing
- A clear statement of which licences, accreditations and contracts are entity-held, and which of those actually have change of control provisions
- The tax attribute position, modelled after the compromise and after the change in ownership, rather than as it appears on the last lodged return
- The administrator's view on the claims a liquidator would otherwise have investigated, and how the deed deals with them
- A funding structure where the contribution is committed rather than forecast. On ASIC's data, deeds with a third party contribution made up 68.4% of those wholly effectuated and 50.3% of the failures, and deeds relying on future trading profits made up 63.3% of the failures against 29.8% of the successes
- A costed process budget including the expert, ASIC relief and the court application, agreed before the proposal is put to creditors
Why an entity acquisition is worth the trouble
Because some things do not survive an asset sale.
- Licences and accreditations held by the entity, which in construction, labour hire, transport, financial services and health can be the whole business
- Contracts that would need counterparty consent to novate, where the counterparty has every incentive to extract value in exchange for it
- Carried forward tax losses, which do not transfer with assets and which can be the largest item on the closing balance sheet
- Trading history, ratings, prequalifications and the continuity that customers and suppliers price
None of that is free. Buying the entity means buying its history, including the claims a liquidator would otherwise have investigated. Which is why the deed matters as much as the transfer: the deed is what compromises the claims, and the section 444GA order is what delivers the shares. They are two halves of the same transaction, and both have to be designed together.
Speak with our deed advocacy team
We act as deed advocates for investors and management teams: structuring the proposal, managing creditor support, running the deed through execution and coordinating the recapitalisation. If you are looking at an entity acquisition out of administration and section 444GA is in the plan, the useful time to talk is before the proposal is finalised.
General information only. This is not legal or financial advice and does not take your circumstances into account. Time and cost estimates are published practitioner ranges for uncontested matters and will vary considerably with complexity. Obtain advice specific to the transaction before acting.
Sources
- Section 444GA and section 444B, Corporations Act 2001
- Fitzroy River Limited Liability Company v Tucker [2025] WASCA 118
- ASIC Regulatory Guide 111 on the content of expert reports, Regulatory Guide 112 on expert independence, and Regulatory Guide 6 on takeovers relief
- Published practitioner guidance on section 444GA process, timing and cost
