June 21, 2021

Court of Appeal to consider basis and scope of discovery in Cayman Islands share valuation proceedings

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From Harneys

In the matter of Qunar Cayman Islands Limited, the company (represented by Harneys) has obtained leave to appeal certain orders for discovery in its proceeding under section 238 of the Companies Law (being the statutory mechanism by which a shareholder may dissent from a merger or consolidation, reject the compensation being offered for its shares, and have the value of its shares in the company determined by the Court instead).

The directions order provided for, in essence, a staged process of discovery by the company (but not by the dissenting shareholders). The company was obliged to: upload certain categories of documents to the data room; then subsequently upload all other documents relevant to the question of fair value; upload additional documents requested on an ad hoc basis by the valuation experts appointed by the parties (as to which there is no limit as to what the experts could ask for); and then hold a meeting between management and the experts, at which the experts could obtain further information and ask questions.

The company appeals this multi-tiered and broad discovery order on the basis that it is not supported by the Grand Court Rules, but rather is the product of an (hitherto) unchallenged practice in share valuation proceedings that has developed in the relatively short time since section 238 was introduced into the Cayman Islands Companies Law. The company also appeals the Court’s decision to refuse its application that the dissenting shareholders provide discovery to the company.

The appeal has been listed for the upcoming sitting of the Court of Appeal in November. This will be the first opportunity the Court of Appeal will have to consider and provide guidance the construction of section 238. The Court of Appeal will also be considering the company’s appeal against anINTERIM PAYMENT ORDER made against it.

For any more information please contact MADELEINE HEALLACHLAN GREIGIAN MANN or PAUL MADDEN.

SOURCE: http://harneysoffshorelitigation.com/scopeofdiscovery/

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