BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Matthew Cowman, Alex Drysdale, Rosalind Nicholson and Omonike Robinson-Pickering, Walkers
Break Fees Break fees are becoming increasingly standard in transaction agreements. For example, in the case of a proposed merger, the agreement and plan of merger may include a provision for a fee to be paid to the original bidder if the board of the target company changes its recommenda - tion and supports a competing bid where the acquisition takes place within a certain period of time from the date of the agreement. When the board of a target is considering whether or not to agree to accept a break fee provision, care must be exercised to ensure that the directors’ fiduci - ary duties at statute and common law are being properly discharged. This will depend on the cir - cumstances of the transaction and the overall deal terms, taking all factors into consideration. As a matter of practice, break fees in transac - tions involving BVI companies operating in the North American market tend to range from 1% to 4% of the merger consideration. If the BVI court were to determine that a particular break fee was excessive and did not operate to pro - vide commercial compensation to a party on termination, instead constituting a penalty, the fee may be unenforceable. “No Shop” Agreement “No shop” agreements or “lock-out” claus - es, whereby the target agrees not to solicit or engage with any other parties regarding the potential transaction during a defined period of time, can be included in transaction agree - ments involving BVI companies. The restrictions will often include provisions to prevent the target company from soliciting a transaction or accept - ing a proposal from a third-party prospective bidder during a defined period of exclusivity.
eration structures have been seen of late, involv - ing combinations of shares in either the surviving or amalgamated company (or its parent), cash or promissory notes. 6.4 Common Conditions for a Takeover Offer There is no specific takeover code in the BVI and there are no specific BVI law requirements restricting the use of offer conditions. Condi - tions for a takeover offer would be subject to the commercial requirements of the bidder (and the target if a recommended offer). 6.5 Minimum Acceptance Conditions There are no minimum acceptance conditions for tender offers under BVI law. 6.6 Requirement to Obtain Financing Any requirement to obtain financing would need to be set out in the plan of merger or consolida - tion and relevant agreements, but it is common for transactions to be conditional upon financing being obtained and upon evidence being provid - ed, in the form of a commitment letter or similar. 6.7 Types of Deal Security Measures There are no prescribed rules under statute or common law with respect to deal security measures in a transaction. However, many BVI companies are based in the United States or Europe, and the influence of the laws of the rel - evant jurisdiction is often felt. It is very common for the transaction agreement to be governed other than by British Virgin Islands law, in which case the availability of deal security measures may be limited or restricted in accordance with the relevant laws. In the BVI, the measures most often seen are as follows.
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