BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Matthew Cowman, Alex Drysdale, Rosalind Nicholson and Omonike Robinson-Pickering, Walkers
business of the target are acquired by way of contractual arrangement. Each of these methods could be used to acquire the target for cash or in exchange for an offer of securities, or a combination of both forms of consideration. Only a Takeover Offer is generally available in the context of a hostile transaction. The key advantages and disadvantages of each structure are discussed below. Merger A Merger is by far the most commonly used structure for a take-private of a BVI company. Mergers do not require court approval and are a registry-based process. The principal advantage of a Merger is that it requires the approval of a majority in excess of 50% or, if any higher majority is required by the memorandum or articles of the BVI company, such higher majority of the votes of those share - holders entitled to vote and actually voting on the resolution to approve the plan of merger and the Merger. As such, unless a higher approval threshold is stipulated in the memorandum or articles, it is possible to obtain 100% control of a target with the approval of a simple majority of the shares voting at a quorate meeting. Scheme A Scheme is a compromise or arrangement between the company and its shareholders or creditors or any class of them. BVI law in relation to Schemes is heavily based on English law. A Scheme is implemented by a court-supervised procedure that, in relation to an M&A transaction, will result in the acquisition of either all or none of the outstanding shares to which it relates, depending on the outcome of the shareholder vote in relation to it and the court’s approval.
A Scheme requires: • the approval of a majority in number rep - resenting 75% in value of the members of each class who attend and vote in person or by proxy at meetings of the holders of each class; and • the sanction of the court. If the Scheme is approved by the requisite major - ity of shareholders and sanctioned by the court, it will be binding on all shareholders. There have been very few Schemes attempted under BVI law, primarily due to the relatively high approval threshold and the timing implications of a court- based process. The crucial potential advantage of a Scheme is that dissent rights do not apply. Plan A Plan is an alternative court-supervised pro - cedure to the Scheme and is based on similar processes available in Canada. The directors propose and approve a Plan, which must contain details of the proposed arrange - ment. The company then makes an application to the court for approval of the Plan. The court may then make an order in relation to the Plan and in making that order the court may: • determine what notice, if any, of the proposed Plan is to be given to any person; • determine whether approval of the pro - posed arrangement by any person should be obtained and the manner of obtaining such approval; • determine whether any holder of shares, debt obligations or other securities in the com - pany may dissent from the proposed Plan and receive payment of the fair value of their shares, debt obligations or other securities under a statutory procedure;
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