Supreme Court Refuses to Strike Out Dissenting Shareholders’ Claim

Supreme Court Refuses to Strike Out Dissenting Shareholders’ Claim

About Dan GriffinDan Griffin

Dan Griffin’s full profile on

By Dan Griffin and Jennifer Haworth

Last year, we noted that the Court of Appeal limited the scope of discovery required to determine the valuation of shares in amalgamating or merging companies in Bermuda.

This year, in the same case, the Supreme Court refused an application to strike out the claims of dissenting shareholders in an action to appraise the fair value of shares on the amalgamation of a company under s106 of the Companies Act 1981.

In the matter of Jardine Strategic Holdings Limited [2022] SC (Bda) 27 Com (20 April 2022) is a case in which Jardine Strategic Holdings Ltd had been recently acquired and amalgamated by JMH Bermuda Ltd as part of a simplification of the Jardine Matheson group structure. The group is a large conglomerate comprising approximately 1,150 companies and employing over 400,000 people across a range of sectors in China and Southeast Asia. A majority are active trading companies and most are subject to independent audit requirements. Some are listed companies.

The Companies Act 1981 requires that amalgamations and mergers be approved by the shareholders at a special general meeting. The directors must also provide a declaration to the shareholders that the share valuation offered represents ‘fair value’ and in this case this was obtained from Evercore Partners International LLP.

Dissenting shareholders were unhappy with the valuation provided, claiming that the price offered represented a 43% discount on the net asset value of Jardine Strategic Holdings Ltd. Some may also have been unhappy with the prospects of resisting the amalgamation given Jardine Matheson Holdings Ltd owned almost 85% of the shares whereas the law requires a 75% majority.

The dissenting shareholders applied to the Supreme Court pursuant to section 106 of the Companies Act 1981, which provides that any shareholder who did not vote in favour of the amalgamation or merger and who is not satisfied that they have been offered fair value for their shares may apply to the Court to appraise the fair value of their shares within one month of the notice of the share valuation. If the Court finds that amount paid to the dissenting shareholder for their shares is less than the value appraised by the Court, then the amalgamated or surviving company must pay the shareholder the difference between the amount paid and the value appraised by the Court.

The dissenting shareholders included ‘event based’ hedge funds which had acquired shares after the company had given notice to shareholders in pursuit of an arbitrage opportunity and in full knowledge of the amount the company had offered for the shares.

The company applied to strike out the dissenting shareholder’s claim, arguing (amongst other grounds) that the correct interpretation of section 106 was that only shareholders who had received the notice could request an appraisal of their shares under section 106 and that the dissenting shareholders were prevented from doing so because they had bought with knowledge of the amalgamation.

The dissenting shareholders argued that section 106 did not impose such a restriction and that any shareholder could make an application provided they did so within one month of the notice. They argued that the company’s interpretation would permit it to forcibly acquire or cancel shares without paying fair value and observed that it would mean the right to request appraisal disappears into a ‘legal black hole’ when shares are sold because the transferor and dissenting shareholder would both lack standing.

The Court refused the application to strike out and agreed with the dissenting shareholders. The Court held that the right to request the Court to appraise fair value can be exercised by any shareholder who holds shares that are in fact taken from them by the company as a result of an amalgamation or merger which they did not approve provided the application is made within the one month time limit in section 106(6).