When Should A Director Refrain From Recommending A Scheme?

Background

The information to be sent to target shareholders seeking their approval of a scheme of arrangement is required to include whether or not each director recommends approval of the scheme; or if a director does not wish to make (or consider they are justified in making) a recommendation, the reasons for not wishing to do so.¹

A bidder will typically require the target to agree in the Implementation Agreement for a proposed scheme that all target directors will recommend approval in the absence of a higher offer and – in the usual case – subject to an independent expert opining that the scheme if fair and reasonable and in the best interests of shareholders.

Gazal Corporation scheme