In Re Sina Corporation (Sina  or the Company), a petition was presented by the Company under section 238 of the Companies Act asking the Court to determine the fair value of shares held by certain shareholders (the Dissenters) following their dissent from a merger between the Company and its buyer group which completed on 22 March 2021 (Merger Closing Date). At a directions hearing held in December 2021, one of the issues for the Court’s determination was whether the valuation date for the purpose of determining the fair value of the Dissenters’ shares should be fixed as at the date of the EGM at which the merger was approved (23 December 2020) (EGM Date), or alternatively, whether the relevant date was the Merger Closing Date, some three months later.

In reaching its decision, the Court noted that the only previous section 238 case where the valuation date was expressly considered was Integra  in 2015. The weight of previous section 238 decisions preferred, on the whole, the EGM date over any other, which the Court found to be persuasive, but not binding upon it, given the dates in those cases were reached by agreement as opposed to following argument. Nevertheless the Court went on to emphasise the desirability of consistency in its approach to the valuation date, so that certainty and confidence could be promoted.

Following argument from the Company and the Dissenters, the Court held that on a proper interpretation of the wording of section 238, the fair value of the relevant shares should be determined as at the EGM Date, immediately before the shareholder vote is held to consider and approve any proposed merger. It is at this stage in the transaction where the merger price is put forward for consideration in light of publicly available information and advice. The Court noted that ultimately, by virtue of section 238 (2), the expressed intention of the Dissenters to invoke entitlement to be paid fair value of their shares becomes immediately crystallised before the EGM, by their objection to the merger.

Therefore, the Court rejected the Dissenters’ argument that the Merger Closing Date should be recognised as the valuation date, in favour of the Company’s submission that the appropriate date was when the merger decision was made i.e. the EGM date.

This decision is an important one which offers welcome clarification to an uncertain area of section 238 litigation, given the potential fluctuations in share value in the intervening period between a merger announcement and its completion.

Harneys acted for the Company.