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Cayman Court makes first fair value
determination in merger dispute
1 September 2015
First published by Appleby in September 2015
The Cayman Islands legislature introduced the statutory merger and consolidation regime which
Locations
Cayman Islands
is now found in Part XVI of the Companies Law (2013 Revision) in May 2009. Since then, the
regime has been widely used to effect mergers and consolidations, but until very recently the
disputes which had arisen between shareholders dissenting from the merger or consolidation
and the companies involved as to the fair value of the dissenters’ shares had all been settled
out of Court.
The reluctance to proceed to trial was perhaps, in part, due to uncertainty as to how the
Cayman Court would approach the task of determining the fair value of the dissenters’ shares, if
it was called upon to do so. Much of this uncertainty has been removed by the recent judgment
of the Cayman Islands Grand Court in In the matter of Integra Group (Jones J, 28 August 2015).
The Court in Integra accepted, quoting from an article entitled Dissenting Shareholders’ Appraisal
Rights in Cayman Islands Mergers and Consolidations which the authors published in The M&A
Lawyer (Oct. 2014, Vol. 18, Issue 9), that:
“Fair value is the value to the shareholder of his proportionate share of the business as a
going concern, save where it is worth less on a net assets (i.e. liquidated) basis as at the
merger date: ex hypothesi the shareholder has bought into the company as a going concern,
not in anticipation of participating in a liquidation, and it follows that, when he elects to dissent
from a merger or consolidation brought about at the behest of the majority, he is thereafter
deprived of his proportionate share of an active enterprise and is entitled to be compensated
for it. In determining the measure of such compensation, the Court should be guided by the
following considerations:
1.1 Fair value does not include any premium for forcible taking (i.e. expropriation of the
shares).
1.2 It is neither appropriate nor permissible to apply a minority discount when making the
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Experts Involved
Tony
Heaver-Wren
Simon
Raftopoulos
Partner
Partner
Cayman Islands
Cayman Islands
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Tony Heaver-Wren
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d +1 345 814 2732
Andrew Jackson
Associate
Cayman Islands
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Simon Raftopoulos
Andrew Jackson
d +1 345 814 2738
d +1 345 814 2748
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