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In a first for the jurisdiction, Mourant Ozannes' Guernsey corporate and litigation teams have successfully opposed the sanction of a proposed scheme of arrangement in the Royal Court of Guernsey.
Mourant Ozannes acted for a minority shareholder in the takeover of Puma Brandenburg Limited (Puma). Puma was attempting to undertake a takeover of itself by implementing a selective share buyback under a scheme of arrangement mechanic. The scheme of arrangement, if sanctioned by the Royal Court, would have resulted in the majority shareholder (who is also a director) acquiring sole ownership of Puma for nil consideration paid by him. Minority shareholders would have received a 43.6% discount to the net asset value of Puma.
At a number of hearings before the Royal Court, Mourant Ozannes contested the mechanics of the takeover, arguing that it was contrary to Guernsey law and was not a transaction that the Royal Court had jurisdiction to sanction. Additionally, it was argued that the Royal Court should refuse to sanction the scheme on discretionary grounds due, in part, to the insufficient nature of the scheme circular disclosure. In a judgment delivered on 24 February 2017, the Bailiff agreed that a scheme of arrangement cannot be used by a company to undertake a share buy-back where the shareholder does not consent to that sale. He went on to find that in any event, he would have rejected the scheme on the discretionary grounds.
Not only did the success in defending this takeover achieve the desired result for the client, importantly, it reaffirmed the position under Guernsey law that specific statutory provisions cannot be overridden through the scheme mechanic and that minority protection rights against prejudicial behavior are able to be enforced, with effect.
The Mourant Ozannes team was led by Partners John Rochester and Abel Lyall, supported by Senior Associates Alex Davies and Jamie Bookless, Associates Ryan Hallett, Victoria Thomas and Sophie Williams and leading London counsel Andrew Thornton from Erskine Chambers.
Advocate Lyall, who appeared for the minority shareholder, commented that: "I am pleased that our combined corporate and litigation teams were able to secure this great result for our client. The outcome demonstrates clearly that schemes of arrangement need careful construction to ensure compliance with statutory provisions and that the Royal Court will critically examine arrangements where the rights of minorities are placed at risk."
This transaction, together with other successful public and private takeovers in 2016, firmly establishes Mourant Ozannes as the leading legal advisor in the jurisdiction for high-level friendly and hostile mergers & acquisitions transactions.
