CAYMAN ISLANDS Law and Practice Contributed by: Shari Seymour, Kerry Ann Phillips and Michael Lockwood, Maples Group
Under Section 238 of the Companies Act (which is broadly similar although not identical to its Delaware counterpart – Section 262 of the General Corporations Law), a shareholder that is dissatisfied with a price paid to it in a merger may seek to have the fair value of their shares determined by the Cayman Islands Grand Court; they are then entitled to a cash payment in that amount (with interest at a “fair” rate to be determined and, depending on the outcome, their legal costs of the proceedings). Such merger appraisal litigation has been most com - mon (although not exclusively) where listed compa - nies have been the subject of a management buyout by way of a take-private. These proceedings have largely been driven by merger arbitrage funds and other similar market participants, which have, in most cases, acquired shares specifically for the purpose of mounting this kind of dissent action. In recent years, a number of cases have gone to trial before the Grand Court, with appeals to the Cayman Islands Court of Appeal (CICA) and further to the Judicial Committee of the Privy Council (JCPC – the “Supreme Court” of the Cayman Islands), so a sub - stantial body of authority and case law has developed within a fairly short timeframe. The outcomes of these cases have varied significantly, largely depending on the facts of each case. The following recent cases are particularly noteworthy. • In Trina Solar (30 September 2025, [2025] UKPC 48), the JCPC overruled the CICA’s decision that, inter alia, no reliance could be placed on the merger price in circumstances where there were failures and inadequacies in the deal process (including a failure to carry out a robust market check). The JCPC rejected the CICA’s finding that the absence of a go-shop was a “fatal flaw” to placing any reliance on merger price, and expressly contemplated that reliance on the merger process might be appropriate even where there was no go- shop, or where there were other flaws or defects in the transaction process. The JCPC held that it was for the trial court to assess each valuation methodology individually to identify its strengths and weaknesses, and emphasised that reliability
in this context is not a binary concept, but rather a qualitative assessment as to where that method- ology lies on a sliding scale. The court must also make a qualitative assessment of the reliability of the methodologies relative to one another. • In 51job, Inc. (24 November 2025, [2025] CIGC (FSD) 112), the Grand Court held that fair value was the adjusted market price of 51job’s stock, which it found to be USD31.11 per share, about half the merger price of USD61 per share and dramatically lower than the USD111.06 per share sought by the dissenters based on a DCF valua - tion. This was the first time the Cayman Islands Court placed exclusive reliance on the market price in a fair value appraisal case, and the first time it found that fair value was lower than the merger price. The dissenters have appealed; the appeal is likely to be heard in summer 2026. • In Sina Corporation (21 November 2025, [2025] CIGC (FSD) 10, but not published until 31 Decem - ber 2025), the Grand Court held that fair value was USD105.26 per share, more than double the merger price of USD43.30 per share, based on a “Sum of the Parts” methodology. The Grand Court rejected reliance on the merger price primarily because of the lack of a go-shop, and rejected the market price because of concerns about efficiency, material non-public information, the effect of COVID-19 and the reliability of the means of rolling forward the market price to the valuation date. Sina has appealed and its appeal is listed for the end of April 2026. 3.2 Significant Changes to Takeover Law There have been no significant changes to takeover law in the past 12 months, and no takeover legislation is under review that could result in significant chang - es in the next 12 months, although the application of dissent rights to parent/subsidiary mergers is under appeal to the Privy Council in In Re Changyou . 4. Stakebuilding 4.1 Principal Stakebuilding Strategies Stakebuilding is not a common or customary proce - dure in the context of M&A transactions involving Cay - man Islands entities.
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