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19 February 2015
The BVI Commercial Court recently issued important guidance to accountancy professionals, BVI companies and their shareholders as to how shares should be valued following a squeeze-out, merger or dissent from other restructuring provisions.
The BVI Business Companies Act 2004 is designed to be flexible and commercially attractive to the international financial community. With that in mind, the act affords protection to investing shareholders to obtain fair value for their shares if they dissent from the followjng transactions:
In circumstances of such dissent and where the company's written offer is not accepted by the dissenting member, the act provides for a statutory appraisal process to fix fair value. The parties appoint two appraisers, who then designate a third appraiser, and the three of them fix fair value of the shares.
In the case at hand the BVI Commercial Court gave guidance on that process. Judge Bannister declared that the statutory appraisal process provides that in the absence of unanimity, the appraisers may fix fair value by majority decision.
This welcome guidance not only means that the process of fixing fair value is more likely to be efficient and conclusive, but also aims to reduce the risk of an impasse were unanimity alone to apply. Accounting professionals will no doubt agree that a valuation process may become muddied in circumstances where the parameters for fixing fair value are not determined at the outset. The risk of valuation inaccuracy is reduced, since inflated valuations are less likely where a majority determination will be determinative absent unanimity. The court's approach to the interpretation of the act serves to make the appraisal process more efficient and less likely to result in deadlock, and will give valuation professionals the certainty and comfort of knowing the statutory parameters to facilitate their engagement in the appraisal process.
The decision is consistent with the Commercial Court's proactive stance in assisting parties utilising the restructuring mechanisms provided under the act, having previously given guidance on minority discounts and contracting out of the statutory process.
For further information on this topic please contact Andrew Thorp at Harney Westwood & Riegels' Tortola office by telephone (+1 284 494 2233), fax (+1 284 494 3547) or email (firstname.lastname@example.org). Alternatively, contact Victoria Lord at Harney Westwood & Riegels' London office by telephone (+44 20 7842 6080), fax (+44 20 7353 0487) or email (email@example.com). The Harney Westwood & Riegels website can be accessed at www.harneys.com.
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