BERMUDA Law and Practice Contributed by: Natalie Neto, Rachel Nightingale and Marah Smith, Walkers
of seeking a fair value appraisal. These hedge funds have been pursuing this strategy with some significant success in the Cayman Islands for over ten years under their comparable fair value legislation. There are currently at least four noteworthy appraisal cases before the Bermuda courts, and several cases have resolved since they were commenced in 2021/2022. Most noteworthy of these is Glendina Pty Lim- ited & Ors v NKWE Platinum Ltd, which was the first Section 106 matter to reach trial in Bermu - da. The shareholders were successful, achieving a 33% uplift in fair value. The court was signifi - cantly guided by the Cayman jurisprudence on fair value and the Cayman approach to appraisal claims, finding as follows. • The fair value of the shares of a dissenting shareholder was held to be “the value to it of its proportionate share of the business if it were sold as a going concern in a hypo- thetical arm’s length transaction. It was the estimated price for the transfer of an asset between identified, knowledgeable and willing parties that reflected the interests of those parties” . • Specifically, the use of the term “fair” requires that “the manner and the method of that assessment and determination is fair to the dissenting shareholder by ensuring that all relevant facts and matters are considered and that the sum selected properly reflects the true monetary worth to the shareholder of what he has lost, undistorted by the limitation and flaws of particular valuation methodolo - gies and fairly balancing, where appropriate, the competing, reasonable reliable alternative approach to valuation relief upon by the par- ties” .
• On the burden of proof, the court concluded that it should follow its usual methods of resolving disputed questions of fact and expert evidence. However, neither party has the burden of proving the fair value of the shares. The proper approach to the resolu - tion of the various matters in dispute is that the onus is on each party to adduce evidence establishing on the balance of probabilities the correctness of any contention on which they rely. • While it will be guided by the evidence of the experts, the court is not bound to adopt the evidence of either of them, and may select some parts but not others, and may come to its own view. • The court found that it was bound to apply a minority discount to the fair value unless it could be shown there was some feature to the case rendering it “special” , such that a discount should not be applied. • Based on the minority discounts applied in the Cayman Islands, the discount should normally be a small one. The Judge applied a discount of 3.7%. • The Judge found that interest is payable on any fair value uplift and approved to apply Bermuda’s statutory rate, which is currently 3.5%, from the date the merger closed. Also of note is the matter of Jardine Strategic Holdings Ltd v Oasis Investments II Master Fund Ltd & Ors, which is to be heard by the Privy Coun - cil in 2025. The company will attempt to strike out the claims of the arbitrage hedge funds on the basis they are not eligible applicants under Section 106 and/or their claims are an abuse of process. The court will also consider questions concerning legal professional privilege and the company’s entitlement to assert it against the shareholders.
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