Offshore Litigation Blog

In iKang Healthcare Group Inc, the Grand Court of the Cayman Islands has released its judgment on the issues of the fair rate of interest under section 238(11) of the Companies Act and the costs of the proceedings. The Court’s fair value judgment was released back in June 2023.

The Grand Court of the Cayman Islands delivered an unusual judgment in section 238 proceedings to determine the fair value of merger dissenters’ shares in an unlisted company, Xingxuan Technology Ltd. Unlike typical management buy-outs where the majority shareholders acquire the shares of the minority, Xingxuan was acquired by a competitor. The trial was uncontested as Xingxuan neither appeared nor had legal representation. The dissenter’s valuation expert gave oral evidence without being cross-examined – described by Justice Kawaley as a “Black Swan” event.

The recent decision of In the matter of China Index provides a further reminder of the principles determining the quantification of an interim payment in fair value appraisal matters in the Cayman Islands. The Grand Court also considered the utility of publishing interim payment judgments in the context of section 238 litigation on the grounds of public interest.

In Soriano v Forensic News LLC and Ors the English Court of Appeal has recently clarified the approach of the English courts to an application for an anti-suit injunction restraining a US 1782 application. A 1782 application is an application under Section 1782 of Title 28 of the United States Code by a litigant in non-US proceedings seeking to obtain discovery from a person who resides in the US for use in the non-US proceedings.

In a recent development to section 238 litigation in the Cayman Islands, the Grand Court has confirmed that the relevant date for the purposes of valuation of dissenting shareholders’ shares should be the date of the EGM.

In Yao Juan v Kwok Kin Kwok and Crown Treasure Group Limited, the Court of Appeal handed down another seminal decision on costs’ recovery agreeing with the Appellant that costs incurred by lawyers not admitted to practice in the BVI are not recoverable.

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.

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.

In the recent decision in the matter of Changyou.com Limited, the Grand Court of the Cayman Islands has resolved the question of whether shareholders who dissent from a “short form” merger are entitled to the same fair value appraisal rights under section 238 of the Companies Act as shareholders who dissent from ordinary mergers.