LAWYERS from Mourant Ozannes in Guernsey are claiming an island first in successfully opposing the sanction of a proposed scheme of arrangement in the Royal Court, where a property holding company was pursuing a takeover of itself.
If the deal had gone through, the majority shareholder of Puma Brandenburg, which held German real estate, would have acquired sole ownership of the business without paying a penny for it. The legal move attempted to implement a selective share buy-back under a scheme of arrangement – never attempted in the island nor in the UK before – and would have left minority shareholders receiving little more than half the asset value of their holding.
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 his judgment, Bailiff Sir Richard Collas 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.
Mourant Ozannes partners John Rochester and Abel Lyall, who led the case for the firm, said that the success in defending the takeover had importantly reaffirmed the position under Guernsey law that specific statutory provisions cannot be overridden through the scheme mechanic and that minority protection rights against prejudicial behaviour can be enforced.