Marc Kish
Partner | Legal
Cayman Islands
Partner
Cayman Islands
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Insight
31 July 2019
Cayman Islands, Hong Kong
3 min read
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Introduction
In a decision that serves as a clear warning to companies seeking to limit their discovery obligations in proceedings brought under section 238 of the Companies Law (2018 Revision) (the "Law"), the Chief Justice of the Cayman Islands has handed a group of dissenting shareholders a significant victory in what will likely become the benchmark for future directions orders in section 238 proceedings in the Cayman Islands.
Ogier represented a group of dissenters comprising over 82% of the total dissenters by number of shares (the "Dissenters").
Background
On 23 August 2018, JA Solar Holdings Co., Ltd ("JA Solar") presented a petition to the Grand Court of the Cayman Islands ("Petition") pursuant to section 238 of the Law to have the fair value of the shares held by the Dissenters determined by the Court. Section 238 of the Law gives a shareholder a statutory right to dissent from the merger of a Cayman Islands incorporated company, and to be paid a judicially determined fair value for the shareholders' shares instead of the merger consideration offered by the company.
Following the presentation of the Petition, there was considerable disagreement between JA Solar and the Dissenters as to the appropriate directions with respect to discovery (by both JA Solar and the Dissenters), the holding and conduct of management meetings, and whether JA Solar should be valued "as a going concern".
JA Solar had sought to amend several of the typical directions ordered in previous section 238 proceedings in order to ensure that those directions were substantially more favourable to its own interests. More particularly, JA Solar sought, among other things:
Decision
In his ruling dated 18 July 2019, Smellie CJ rejected each of the above directions sought by JA Solar.
Beginning with the "very vexed" issue of discovery by companies in section 238 proceedings, His Lordship noted the Court's experience of companies providing far more limited discovery than that which dissenting shareholders were seeking, or what would ordinarily be discovered in contested commercial litigation. His Lordship considered that these attempts to circumscribe the scope of company discovery should be viewed with "scepticism", in view of what His Lordship considered to be "the central importance of discovery by companies" in section 238 proceedings and accordingly, found that:
Conclusion
The Chief Justice's reasoned judgment in this matter is likely to be treated as the benchmark for the determination of future directions in section 238 proceedings. It represents a significant victory for dissenting shareholders wishing to have the fair value of their shares determined by the Court under section 238 of the Law.
[1] In the Matter of Qunar Cayman Islands Limited [2018(1) CILR 199]
Marc Kish
Partner | Legal
Cayman Islands
Partner
Cayman Islands
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Rachael Reynolds KC
Global Senior Partner | Legal
Cayman Islands
Global Senior Partner
Cayman Islands
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Oliver Payne 彭奥礼
Partner 合伙人 | Legal
Hong Kong
Partner 合伙人
Hong Kong
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Shaun Maloney
Partner | Legal
Cayman Islands
Partner
Cayman Islands
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