{"id":5720,"date":"2020-02-24T05:12:48","date_gmt":"2020-02-24T10:12:48","guid":{"rendered":"http:\/\/f5wp.azurewebsites.net\/?p=5720"},"modified":"2020-03-19T05:19:55","modified_gmt":"2020-03-19T10:19:55","slug":"nothing-is-illuminated-shanda-games-in-the-privy-council","status":"publish","type":"post","link":"https:\/\/www.campbellslegal.com\/client-advisory\/nothing-is-illuminated-shanda-games-in-the-privy-council-5720\/","title":{"rendered":"Nothing is illuminated: Shanda Games in the Privy Council"},"content":{"rendered":"

There are no \u201cbright-line rule[s]<\/em>\u201d. In an appraisal of the \u201cfair value\u201d of a dissenter\u2019s shares in a statutory merger under section 238 of the Companies Law of the Cayman Islands, the Privy Council had to decide whether the value of the dissenter\u2019s shares should be determined on a pro rata basis.<\/p>\n

The Board\u2019s opinion was that:<\/p>\n

    \n
  1. The dissenter\u2019s shares are not to be valued as a pro rata proportion of the value of the entire share capital of the company, which broadly would correspond to a share in the company\u2019s business and undertaking.<\/li>\n
  2. What is to be valued is the actual shareholding itself, and not some hypothetical share.<\/li>\n
  3. Application of a minority discount is neither prohibited nor mandated, as a matter of law.<\/li>\n<\/ol>\n

    In relation to the first two points, the views of the Court of Appeal of the Cayman Islands (\u201cCICA<\/strong>\u201d) were upheld. First, in the context of schemes of arrangement and squeeze-outs, the court performs \u201ca function which is comparable to that performed by section 238 in providing for the review of the valuation of shares in a publicly-held company on the occasion of a non-voluntary disposition<\/em>\u201d. Second, as a matter of general principle, the court should value the actual shareholding which the shareholder has to sell and not some hypothetical share. This is because the offeror does not acquire control from any individual minority shareholder.<\/p>\n

    On the third point, the Board\u2019s view was that the CICA was wrong to suggest that a minority discount should be applied in all cases, as a matter of law. Without giving an example, the Board said that \u201cthere might be a case where a minority discount was inappropriate due to the particular valuation exercise under consideration<\/em>\u201d.<\/p>\n

    This decision may have a limited impact on this area of jurisprudence. As the Board noted, no one contended for a different valuation, in the event that the Board\u2019s opinion was that shares should not be valued on a pro rata basis. So, when an income methodology \u2013 such as a DCF analysis \u2013 is used to value a dissenter\u2019s shares, valuations may continue to be carried out by valuing the business as a whole, prorating that value across the issued shares, and then adjusting (if necessary) to reflect the fact that any given shareholding is a minority shareholding.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Guy Manning and Hamid Khanbhai discuss the Privy Council\u2019s first consideration of an appraisal action brought under section 238 of the Companies Law of the Cayman Islands. The Board considered a narrow question of how a dissenter\u2019s shares should be valued. <\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"yst_prominent_words":[15,1115,843,1978,1480,1975],"class_list":["post-5720","post","type-post","status-publish","format-standard","hentry","category-client-advisory"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5720"}],"collection":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/comments?post=5720"}],"version-history":[{"count":1,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5720\/revisions"}],"predecessor-version":[{"id":5721,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5720\/revisions\/5721"}],"wp:attachment":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/media?parent=5720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/categories?post=5720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/tags?post=5720"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/yst_prominent_words?post=5720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}