Federal Court clears zero-value share transfer to complete Rex Airlines DOCA

The Federal Court of Australia has approved the compulsory transfer of all shares and employee equity instruments in Regional Express Holdings Ltd to a vehicle controlled by US-based Air T Inc, clearing the final condition required to implement a creditor-approved deed of company arrangement and preserve Rex’s regional airline operations, Justice Michael Stewart held.

The ruling grants the deed administrators leave under section 444GA of the Corporations Act to transfer Rex Holdings’ entire issued share capital to Air T Rex Acquisition Inc for nil consideration, notwithstanding shareholder opposition to receiving no payment, after the Court found there was no residual equity value and no unfair prejudice. The Court also used its broad powers under section 447A to extend the relief to employee share options and other equity-linked instruments issued under Rex’s long-running “Gift Offer” program.

Rex entered voluntary administration in July 2024 amid mounting losses and liquidity pressure, later expanding the process to multiple subsidiaries. While the group’s short-lived metropolitan jet operations were discontinued, administrators continued trading the core regional turboprop network with interim funding support from the Commonwealth of Australia while pursuing a recapitalisation or sale. An initial sale process failed, but a second campaign in 2025 culminated in Air T’s proposal to acquire control through a DOCA rather than an asset sale.

Under the DOCA, Air T will inject cash into a creditors’ trust, assume restructured Commonwealth secured debt estimated at about $140 million, take on ongoing employee entitlements, and fund priority employee claims in full. Ordinary unsecured creditors are not expected to receive a distribution, but administrators said this outcome mirrors a liquidation scenario while preserving jobs, supplier relationships, and regional air services. Creditors overwhelmingly approved the DOCA at meetings held in November 2025.

Shareholders argued that the forced transfer for nil consideration was inherently unfair. Justice Stewart rejected that position, relying on independent expert evidence showing Rex Holdings had a substantial negative equity position, with an estimated deficiency of several hundred million dollars on both going-concern and liquidation bases. In those circumstances, the Court held, shareholders would receive nothing whether or not the DOCA proceeded, and liquidation was the only realistic alternative if the transfer were blocked.

The Court took the same approach to employee equity rights. Although the Corporations Act provision expressly refers only to shares, Justice Stewart followed recent authority allowing the statute to be modified so that options and similar instruments could be transferred alongside shares where they were valueless and their transfer was necessary to give effect to the restructuring. Employees holding such rights would be in no worse position in liquidation, the Court found.

Justice Stewart also approved, on a precautionary basis, an amendment to the Commonwealth funding arrangements releasing the administrators and liquidators from ongoing liability, clearing another step toward closing out the administration and liquidation processes tied to the Rex group.

Read the decision here.

Michael Izzo SC of Eleven Wentworth and Daniel Krochmalik of 3 St James' (instructed by White & Case) represented the administrators, Samuel Freeman, Adam Nikitins, and Justin Walsh of Ernst & Young.

Vanessa Whittaker SC of Banco Chambers and Frank Tao of Ninth Floor Selborne Chambers (instructed by Corrs Chambers Westgarth) represented Air T Inc.