Over the past 12-18 months we have seen a marked increase in the number of BVI statutory fair value appraisals as a result of minority shareholders exercising dissent rights to certain types of transactions, including take-private transactions and SPAC acquisitions.
In a recent judgment in the matter of Nettar Group Inc v Hannover Holdings S.A. the BVI Court provided clarification on the right to dissent and held that a member can only exercise dissenter rights under section 179 of the BVI Business Companies Act in respect of shares for which it is the registered shareholder as at the date on which written notice of objection is given pursuant to section 179(2) of the Act or, where such notice is not required, the date of giving written notice of election to dissent pursuant to section 179(5) of the Act.
The Court rejected the Defendant’s argument that a member is entitled to dissent and be paid fair value in respect of shares held at the merger effective date but acquired after the deadline for providing the statutory notice to dissent.
The judgment serves as a reminder to investors who wish to dissent that they must comply with the statutory formalities within the prescribed period for doing so. Investors are advised to seek the advice of BVI legal counsel at an early stage to ensure that such rights are validly exercised.
Similar to jurisdictions such as Delaware and the Cayman Islands, the BVI Business Companies Act provides a statutory right for a member of a company to demand payment of the fair value of its shares upon dissenting from one of five types of statutory transaction: (i) a merger; (ii) a consolidation; (iii) a transaction which results in the disposal of more than 50% in value of the assets or business of the company outside of its ordinary course of business; (iv) a compulsory redemption of a member’s shares by the company – members holding at least 90% of the voting rights of a company have a statutory right to instruct the company to compulsorily redeem the shares held by the remaining members; and (v) an arrangement.
The legislative intention and effect of section 179 of the Act is to give minority shareholders of a BVI company a right to exit the company in exchange for fair value of their shares where they dissent to certain types of transaction which the majority of shareholders wish to enter into. It is an important right and remedy for minority shareholders of a BVI company and has been invoked on a number of occasions in recent years, in particular by minority shareholders of listed BVI companies who wish to dissent to the company entering into a take private transaction.
Unlike in certain jurisdictions where fair value of a dissenter’s shares is determined by the court, the BVI Business Companies Act provides for an expedited process whereby in the event that the parties cannot agree on the amount to be paid, fair value will be fixed by three appraisers within a twenty day period and that value is binding on the company and the dissenting member for all purposes.
A copy of the Court’s judgment in Nettar Group Inc v Hannover Holdings S.A. can be accessed here: Nettar Group Inc v Hannover Holdings SA Judgment 177 of 2021.
A copy of Campbells’ client advisory on the statutory appraisal process under section 179 of the BVI Business Companies Act can be accessed here: Overview of BVI Dissenter Rights and Statutory Appraisal Process.
Liam Faulkner, a Partner in Campbells’ Litigation, Insolvency & Restructuring team, acted for Nettar Group Inc in successfully obtaining the urgent declaratory relief sought on the rights of dissenters. Nettar Group Inc, a market leader in earth observation and high resolution satellite data collection, is expected to enter into a SPAC business combination in early 2022 with the post-combination company, Satellogic Inc, trading on the Nasdaq.
