Tipp Investments PCC Claimant v [1] Chagala Group Ltd [2] Michael Carter [3] Francisco Parilla [4] Javier Del Ser Perez [5] Computershare Company Nominees Ltd [6] Euroclear Nominees Ltd Defendants
| Jurisdiction | British Virgin Islands |
| Judge | Davis-White |
| Judgment Date | 09 November 2016 |
| Judgment citation (vLex) | [2016] ECSC J1109-1 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO. BVIHC (COM) 2016/102 |
| Date | 09 November 2016 |
EASTERN CARIBBEAN SUPREME COURT
COMMERCIAL DIVISION
IN THE HIGH COURT OF JUSTICE
CLAIM NO. BVIHC (COM) 2016/102
Mr. Michael McParland and Mr. Richard Baird for the Claimant
Mr. Richard Evans for the 1 st Defendant
Mr. Michael Todd QC and Miss Rosalind Nicholson for the 2 nd to 4 th Defendants
Davis-White QC, J (Ag): I have before me five applications. They arise in the context of proceedings brought by Tipp Investments PCC (" Tipp"), a company incorporated in Mauritius, in effect complaining, and seeking relief in respect, of a restriction notice (the " Restriction Notice") placed on shares, in which it has a beneficial interest, in the capital of Chagala Group Limited (" Chagala"). Chagala is a company incorporated in the British Virgin Islands. Its ordinary shares are admitted to the standard segment of the Official List and to trading on the London Stock Exchange's Main Market. (A standard listing offers a lower degree of protection than a listing on the premium segment of the Official List). Chagala is the first defendant in the proceedings. It is the holding company of a group of companies whose business is to provide administrative services to the oil and gas industry in Kazakhstan. This involves a primary focus on developing real estate in Western Kazakhstan and the provision of accommodation, catering, leisure, transport, office space warehousing and logistics support. Its headquarters are situated at Almaty in Kazakhstan.
The 2 nd to 4 th defendants to the proceedings are three individuals who are directors of Chagala ("the Directors"). The fifth and sixth defendants have recently been joined to the proceedings in circumstances that I shall explain later. They are respectively Computershare Company Nominees Limited (" Computershare") and Euroclear Nominees Limited (" Euroclear") (together the " Nominees"). No relief is sought against the Nominees but they have been joined to remedy any defect, which is denied, in the claimant's locus or standing to bring the current proceedings. The Nominees are each incorporated in different constituent parts of the United Kingdom. Computershare is registered in Scotland. Euroclear is registered in England and Wales. They are part of the structure that is in place to enable Chagala's ordinary shares to be traded through the well-known CREST system. Essentially this system comprises a computerised central securities depositary and electronic settlement system for securities traded through the London Stock exchange. For present purposes it is, in effect, a paperless securities settlement system. The legal structure which has been set up to enable trading through CREST is something that I will have to return to later. For present purposes it suffices to say that the economic owner of shares in Chagala may not be the legal registered owner of those shares. Indeed, the challenge made to the locus of Tipp to bring the current proceedings is on the basis that Tipp is not the registered holder of the shares in question and therefore not a member of Chagala with power to bring proceedings under s184B of the BVI Companies Act, 2004.
Although the two companies mentioned have been added to the amended claim form, they have yet to be served. One of the applications before me is for leave to serve the amended claim form on them out of the jurisdiction. For the purposes of the section of this judgment under the heading "Factual background", I shall treat the economic owners of shares as if they were shareholders for ease of reference only and ignore the legal technicality that such holding may be indirect through one or more other entities.
By notice dated 18 th May 2016 Chagala gave notice that its Annual General Meeting would be held at an address in Hong Kong on 13 th June 2016. Among the items to be considered were three separate resolutions to re-elect each of the Directors as executive or non-executive directors of Chagala.
On 31 st May 2016 Tipp acquired 3,075,000 ordinary shares in the capital of Chagala. This represented a holding of just under 14.5%. The shares in question were already in the CREST system and were acquired from investment funds managed by Sturgeon Capital Limited.
By letter dated 6 th June 2016 two other shareholders, Eagle Resource Holdings Limited (" Eagle") and Typhoon Developments Limited (" Typhoon"), holding between them just over 11.3% of Chagala's ordinary shares, sought to requisition a general meeting of members to consider the appointment of three named individuals as new independent non-executive directors. The letter effectively expressed disappointment in the performance of Chagala under its existing board of directors and expressed the belief of the authors that the appointment of new independent Non-Executive directors to work with, and strengthen, the board was the best way to enable Chagala to return to growth. Tipp's position is that it did not know of this letter at the time and that it was not involved in the proposals set out in it.
By notice dated 10 th June 2016, signed by chairman of the board of Chagala, Mr Carter, the second defendant in these proceedings, notice was given pursuant to regulation 13.8 of Chagala's articles of association to a number of parties (the " Direction Notice"). The first party was Computershare defined as " the Nominee". It was addressed as being " for the following accounts", there were then listed four accounts. The first three accounts specified were in the name of Euroclear. The first account referred to being in the amount of "3,075,000 Tipp Investments PCC"; the second was an account in the amount of 1,225,875, the third was in the amount of 208,271. A fourth account in the name of HSBC Global Custody Nominee (UK) Limited was then identified in the amount of 1,526,548. There were then identified three certified "shares holders" (sic): being Eagle, Nautilus Fiduciary (Asia) Limited and Typhoon. Each of the persons set out in the "addressees part" of the Notice, other than the Nominee (Computershare) were defined as being a " Concert Party Member" and the Concert Party Members together as being the " Concert Party". The notice then referred to a number of matters including the acquisition of shares by Tipp on 31 st May 2016; the requisition of Eagle and Typhoon dated 6 June 2016; " certain other correspondence and communications which the Company has had with representatives of Concert Party Members" and regulation 13.1 of Chagala's articles of association which it then set out.
Regulation 13.1 of Chagala's articles of association provides as follows:
"13. TAKEOVER PROVISIONS
13.1 Except with the consent of the Board, when:—
(a) any person acquires, whether by a series of transactions over a period of time or not, Shares which (taken together with Shares held or acquired by persons acting in concert with him) carry 30% or more of the voting rights of the Company; or
(b) any person who, together with persons acting in concert with him, holds not less than 30% but not more than 50% of the voting rights and such person, or any person acting in concert with him, acquires additional Shares which increase his percentage of the voting rights: such person (" the offeror") shall extend an offer, on the basis set out in this Regulation 13, to the holders of all the issued Shares."
The regulation goes on to deal with the terms of the offer to be made pursuant to regulation 13.1, places limits on acquisitions of shares which might trigger obligations to make an offer under regulation 13.1, limits the rights of offerors under the article while an offer is in progress, and makes provisions regarding the application of the United Kingdom City Code on Takeovers and Mergers and so on. Regulations 13.8 and 13.9 provide as follows:
" 13.8 if at any time the Board is satisfied that any Shareholder having incurred an obligation under this Regulation 13 to extend an offer to the holders of all the issued Shares shall have failed so to do, or that any Shareholder is in default of any other obligation imposed upon Shareholders pursuant to this Regulation 13, then the Board may, in its absolute discretion at any time thereafter by notice (a " direction notice") to such Shareholders and any other Shareholders acting in concert with such Shareholders (together " the defaulters") direct that:
(a) in respect of the Shares held by the defaulters (the " default shares") the defaulters shall not be entitled to vote at a general meeting either personally or by proxy or to exercise any other rights conferred by membership in relation to meetings of the Company;
(b) except in a liquidation of the Company, no payment shall be made of any sums due from the Company on the default shares, whether in respect of capital or dividend or otherwise, and the Company shall not meet any liability to pay interest on any such payment when it is finally paid to the Shareholders;
(c) no other distribution shall be made on the default shares. The Board may at any time give notice cancelling a direction notice.
13.9 in construing this Regulation 13, words and expressions used or defined in the City Code shall bear the same meanings given by the City Code."
It is important to note that the United Kingdom City Code on Takeovers and Mergers the (" Takeover Code") contains in rule 9 the well-known requirement to make a mandatory takeover bid in circumstances where certain levels of control over a company are acquired. In very broad terms, regulation 13.1 of Chagala's articles of association mirrors rule 9.1. In fact Chagala is...
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