Blog

In Cayman Islands Section 238 litigation – disputes as to the fair value of shares held by shareholders of a company that has been privatised – dissenting shareholders are turning to foreign courts to obtain parallel discovery in support of their claims. In two recent decisions, dissenters have relied on US Section 1782 discovery and letters of request to the Hong Kong Court to seek additional documents in those proceedings.

In Pavel Sazonov v Elena Silkina and another Justice Jack, sitting in the BVI Commercial Court, ordered that a company’s register of members should be rectified on an interim basis, subject to determination of the ultimate ownership of the company at the trial of the underlying proceedings.

In the recent decision of IsZo Capital LP v Nam Tai Property Inc, Justice Jack of the BVI Commercial Court held that a private placement was made for an improper purpose; principally to defeat a validly issued requisition for a shareholders’ meeting. The Court held that the placement was void, and ordered re-institution of the shares to their pre-placement value.

Petitions filed under Section 238 of the Cayman Islands Companies Act are ultimately concerned with one thing: the fair value of shares held by shareholders who have dissented from a merger or consolidation and therefore rejected the price offered to them for their shares. The company subject to the merger contends for a lower valuation; the dissenting shareholder contends for a higher valuation; expert valuation evidence is adduced; the Court, with the assistance of the experts, arrives at a fair value figure.

On 15 March 2021 the Commercial Court of the British Virgin Islands granted an injunction to adjourn an EGM called to consider the privatisation of NASDAQ listed BVI company, Newater Technology Inc, on the application of a shareholder.

In the recent case of Byers and others v Chen, the Privy Council examined the role of a director.

In Ming Siu Hung v J F Ming Inc., the Privy Council allowed an appeal from the Court of Appeal of the Eastern Caribbean Supreme Court, and upheld the decision of the BVI trial judge which had found unfair prejudice in the conduct of the affairs of the BVI company by the majority shareholder (and which resulted in a buy-out order).

In the recent decision of Iranian Offshore Engineering v Zavarei the High Court of England and Wales was concerned with a complex international fraud.

The Cayman Court has delivered judgment in Trina Solar Limited. This is likely to be the first case under section 238 of the Companies Law in which fair value is determined to be below the merger price. This is a significant win for Trina and will have a big impact on future s238 cases.