Shanda: Minority Discounts In S.238 Fair Value Proceedings

The Board of the Privy Council (Board) recently handed down its decision in Shanda Games1, a case involving the determination of "fair value" of shares pursuant to s.2i38 of the Cayman Islands Companies Law (Law). The Board upheld the Cayman Islands Court of Appeal (CICA)'s finding that a minority discount should be applied when determining the fair value of the dissenters' shares in Shanda, to take into account that those shares were a minority shareholding. However, the Board made it clear that its decision applied only to the fair value determination in Shanda, and held that the CICA was wrong to find that a minority discount will apply in all circumstances.

The Board upheld the CICA's ruling that, when determining the "fair rate of interest" to be paid to dissenting shareholders, the Court should not use the principles applied when determining interest on an award of damages, but rather the "mid-point approach" which takes into account the rate at which the