CAYMAN ISLANDS Law and Practice Contributed by: Shari Seymour, Kerry Ann Phillips and Michael Lockwood, Maples Group
Where a target company is CSX listed, the Code pro - vides that an offer must not be subject to conditions depending solely on subjective judgements by the directors of the offeror, or the fulfilment of which is in their hands, save with the consent of the CSX Counsel Executive. 6.5 Minimum Acceptance Conditions Tender offers are conditional on a bidder acquiring a sufficient number of target shares to avail themselves of the procedures set out in 2.1 Acquiring a Company or 6.10 Squeeze-Out Mechanisms . 6.6 Requirement to Obtain Financing A business combination can be conditional on the bid - der obtaining financing. 6.7 Types of Deal Security Measures Bidders may negotiate with the target for the provision of break fees, non-solicitation undertakings, exclu - sivity periods and match rights on competing bids, among other deal security measures. When agreeing to any such protection measures, the board of direc - tors of a Cayman Islands target company should take into account their fiduciary and other duties owed to the company, and be comfortable that such arrange - ments are permissible under the company’s articles of association and are in the best interests of the com - pany. 6.8 Additional Governance Rights If a bidder does not seek 100% ownership of a tar - get, examples of additional governance rights that the bidder can seek outside of its shareholdings include negotiating with the target for the right to nominate a person for appointment as a director of the target, and/or for special consent rights that accrue to the bidder or its nominee director(s). Unless the memo - randum and articles of association provide otherwise, the business and affairs of a company are managed by its board of directors. In the context of an LLC that is managed by a board of managers, the bidder could similarly seek rights to appoint the managers if this is not already provided for in the operating agreement of the LLC.
To the extent that a bidder acquires such number of a Cayman Islands company’s shares to pass a spe - cial resolution under Cayman Islands law (typically, a two-thirds majority of those shareholders attending and voting at the relevant meeting), it would be able to amend the company’s memorandum and articles of association (subject to certain limited exceptions), pass a shareholder resolution authorising a plan of merger (provided that the board had also approved that) and place the company into voluntary liquidation, among other matters. If a bidder acquires a sufficient interest in an LLC, it may be able to cause equivalent actions in respect of such LLC, subject to the terms of the LLC agreement Subject to the memorandum and articles of associa - tion of a Cayman Islands company, shareholders may vote by proxy at general meetings of the company. 6.10 Squeeze-Out Mechanisms When a takeover offer is made and accepted by hold - ers of 90% of the shares to which the offer relates within four months, the offeror may, within a two- month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. Shareholders who wish to object to the offer may apply to the court for relief under Section 88 of the Companies Act, which provides that the transfer will happen unless the court “thinks fit to order oth - erwise”. However, there is a heavy burden of proof on shareholders dissenting under Section 88 to show that the offer is unfair and not merely open to criticism, and a presumption that an offer accepted by 90% of shareholders is fair. Squeeze-outs using this mecha - nism are very rare in practice, including in light of the availability of parent-subsidiary mergers. In some circumstances, transactions similar to a merger, reconstruction and/or amalgamation may be achieved through means other than these statutory provisions, such as a share capital exchange or asset acquisitions. See also 2.1 Acquiring a Company . constituting the LLC. 6.9 Voting by Proxy
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