BRITISH VIRGIN ISLANDS Law and Practice Contributed by: Matthew Cowman, Alex Drysdale, Rosalind Nicholson and Omonike Robinson-Pickering, Walkers
“Fiduciary Out” Clause Directors must be mindful of their fiduciary duties to the company during the course of any poten - tial acquisition. In particular, directors will need to be careful to act in the best interests of the company, acting honestly and in good faith as required under the BVI Business Companies Act, 2004 (as amended). “Fiduciary out” provision allows the board of a target company to change its recommendation for the proposed bid and/ or terminate the agreement if following through with the transaction would result in a breach of the directors’ fiduciary duties. While these provi - sions are usually the subject of intense negotia - tion in transactions, they are often accepted in principle. Such provisions may require the target board to submit the transaction to its shareholders for approval, even when the board is no longer recommending the transaction, for example, where the target has received what it regards as a superior alternative proposal. 6.8 Additional Governance Rights Theoretically, a bidder could seek contractual rights to appoint and remove directors of the target upon closing/acquisition of the target in order to flood the target’s board and gain con - trol. Alternatively, additional governance rights could be enshrined within the target’s constitutional documents that would be adopted upon clos - ing, and/or a shareholders’ agreement could be entered into, which could grant a wide variety of contractual governance rights. However, it would be difficult to force any such provisions on the remaining shareholders. Sub - ject to any different voting thresholds in the exist - ing Memorandum and Articles of Association,
the Memorandum and Articles of Association of a BVI company may be amended upon the approval of a majority of shareholders present and voting in person or by proxy at a meeting or by way of written consent. Shareholders’ agree - ments entered into by some but not all share- holders will not be binding on those who do not agree to be bound, although the company will, if it is a party. Care must be exercised by the directors in agreeing to any such additional governance rights as they have a fiduciary duty (subject to some limited exceptions) to act in the best inter - ests of the company as a whole and not to act solely in the interests of a particular shareholder or shareholders. 6.9 Voting by Proxy Under BVI law, at a general meeting, each mem - ber is generally entitled to one vote for each share they hold, and such votes may be given in person or by proxy. Only shareholders with voting rights attached to their shares may attend and vote at a general meeting, except in the case of an amalgamation or merger, where all shares carry the right to vote regardless of whether or not they do otherwise. 6.10 Squeeze-Out Mechanisms The BVI Business Companies Act, 2004 (as amended) contains squeeze-out provisions, which apply only where the hostile party holds 90% of the votes of the outstanding shares enti - tled to vote and 90% of the votes of each class of share entitled to vote as a class. The squeeze- out provisions may also be restricted or disap - plied in the BVI company’s Memorandum and Articles of Association. Short-form mergers are available in the BVI but apply only between a parent company and its
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