UKSC holds that shareholders who invest with knowledge of an amalgamation have standing to demand fair value for their shares

In Jardine Strategic Limited v Oasis Investments II Master Fund Ltd the Privy Council (on appeal from the Court of Appeal for Bermuda) held that shareholders who acquired their shares after the date of notice of the meeting at which a proposed amalgamation would be voted on, and with knowledge that the proposed amalgamation would be approved and implemented, had standing to pursue fair value appraisal proceedings under section 106 of the Companies Act 1981 of Bermuda. This decision is likely to be considered in other jurisdictions with similar statutory appraisal regimes. In Jardine, approximately 84 per cent of the shares held by the dissenting shareholders were acquired after the date of the notice and with knowledge that the amalgamation would be approved (due to an undertaking given by the Jardine Matheson group's ultimate holding company to vote in favour of the resolution). The Company sought to argue that only those shareholders who held shares at the date of the notice had standing to bring appraisal proceedings under section 106 - a position which was rejected at first instance and on appeal. On appeal, the Board rejected each of the Company's three grounds of appeal. The Company submitted that as a matter of construction of section 106, the right to apply for a court appraisal is restricted to those who held shares at the date of the notice of the EGM Section 106(6) provides that any shareholder who did not vote in favour of the amalgamation or merger "and who is not satisfied that he has been offered fair value for his shares" may apply to the court, within one month of the notice, to appraise the fair value of their shares. The Company submitted that these words demonstrate that a company putting forward an amalgamation proposal is making an "offer" to its shareholders. The Company argued that an "offer" is made to shareholders entitled to receive the notice, being those on the register of members at the date of the notice of meeting (or any applicable record date), and therefore only those shareholders are entitled to apply for relief. The Board held that: The Company was seeking to place undue weight on the word "offered". No "offer" to shareholders is made in an amalgamation. There is no offer capable of acceptance or rejection and at no stage is a contract concluded between the amalgamating parties and their shareholders. An amalgamation is a statutory process and the rights of shareholders arise and are enforceable under statute. The words "he has been offered fair value for his shares" in section 106(6) refer to the fair value of the consideration under the amalgamation proposal or to the fair value stated in the notice. It is therefore irrelevant to identify the group of shareholders to whom an "offer" is made. There is nothing more generally in section 106 to suggest that the right to apply for a court appraisal is limited to those shareholders to whom notice is sent. The notice is a notice of meeting, not the communication of an offer. As previously noted by Justice Kawaley (in a commercial law publication in Bermuda) a dissenting shareholder is one who does not vote in favour of the amalgamation at the meeting convened by the notice. That is the only means under the statutory provisions by which a shareholder can dissent. Therefore, it is the shareholders at the date of the meeting who have the right to be paid the "fair value". The Company also submitted that the legislation of other countries from which the shareholder appraisal regime took its inspiration, particularly Canada, shows that the purpose of the regime was to protect shareholders as at the time when the proposal was made and not those who subsequently acquired shares. In addition, the Company sought to rely on a decision of the New York Supreme Court (Application of Stern) where the Court held that those in the position of shareholders who had acquired stock after a plan for merger had been adopted and publicised did not enjoy appraisal r...