Fair Value Proceedings: Shanda Games

The Court of Appeal of the Cayman Islands ("CICA") has reversed the Grand Court on an important point of principle for determination of the "fair value" of the shares of a shareholder who dissents from a statutory merger under Part XVI of the Companies Law. See Shanda Games (CICA 12 of 2017, unrep., 6 March 2018).

The CICA held that, if a dissenter holds a minority shareholding, fair value of the dissenter's shares should reflect any applicable minority discount. In terms of the mechanics of carrying out the valuation exercise, the Court is to determine the value of the shares as a proportion of the total value of the company, but that value should then be adjusted to reflect any applicable minority discount and to reflect the rights and obligations attaching to the shares that the dissenter actually possesses. On the facts of the case, the experts appear to have agreed that a minority discount would reduce the value by around 23%, which would still have meant that