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 determination”.

The Court further accepted that the concept of fair value excludes any enhancement or diminution in the value of the shares which is attributable to or results from the merger, holding in particular that any cost saving which resulted from the delisting of shares in the company, and any dilution of the dissenters’ shareholdings which occurred as a result of the merger, could not be taken into account in arriving at fair value.

The acceptance of these key principles by the Cayman Court in Integra is a welcome development for Cayman Islands law in this area. The ruling serves to narrow the valuation issues which can reasonably be in dispute between the parties and ensures that the expert valuation evidence is prepared with a certain definition of fair value in mind. The parties to future fair value disputes will doubtless approach their negotiations and the proceedings themselves with greater clarity and confidence in light of this decision.

If you have any questions or require further information, please get in touch with your usual Appleby contact.

Share
X.com LinkedIn Email Save as PDF
More Publications
Appleby-Website-Fund-Finance
25 Mar 2025

Rights and Liabilities of Limited Partners of Exempted Limited Partnerships in the Cayman Islands

This overview will cover key aspects of Exempted Limited Partnerships (ELPs) under Cayman Islands la...

Appleby-Website-Technology-and-Innovation
14 Mar 2025

Snapshot of Recent Updates to the Virtual Assets Regime in the Cayman Islands

The Cayman Islands Monetary Authority (CIMA) – the regulatory authority for virtual assets – has...

Appleby-Website-Cayman2
10 Mar 2025

Empowered Voices: Caymanian Women Leading the Way at Appleby

The Cayman Islands is home to a dynamic community of women helping shape the legal industry. At Appl...

IWD Grid Capture
8 Mar 2025

International Women’s Day 2025 roundtable: Rights. Equality. Empowerment.

As we recognise International Women’s Day 2025, we are reminded that gender equality is not just a...

Appleby-Website-Regulatory-Practice
27 Feb 2025

Cayman Islands Regulatory Round Up - Winter 2024/2025 edition

Welcome to the Cayman Islands Regulatory Round Up: October 2024 – February 2025 This update cov...

Appleby-Website-Corporate-Finance
20 Feb 2025

The Utility of the Share Premium Account in Cayman Islands Exempted Companies

Cayman Islands exempted companies are valued for their flexibility and ease of operation. A key com...

Appleby-Website-Mergers-and-Acquisitions
20 Feb 2025

Cayman Short Form Merger – is it a loophole?

Section 238 of the Companies Act (2025 Revision) (the “Act”) provides a statutory right for shar...

Appleby-Website-Banking-and-Financial-Services
19 Feb 2025

Recent Updates on BVI, Cayman and Bermuda laws

Entities incorporated or registered in the British Virgin Islands (BVI), Cayman Islands and Bermuda ...

Fund Finance
4 Feb 2025

Fund Finance Laws and Regulations 2025 – Cayman Islands

Appleby Cayman Islands' partners Simon Raftopoulos and Georgina Pullinger provide comprehensive insi...