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When it Comes to Corporate Takeovers, Judges Have Shareholders' Backs

Some corporate takeovers are controversial while others are not, but, either way, judges perform a vital role in ensuring that every shareholder gets a fair deal. A proposed change in ownership of a multinational consultancy company provided a perfect example of rigorous judicial scrutiny in operation.

The company had 163 offices in 42 countries and was valued on an enterprise basis at over $2.8 billion. It had received a takeover bid from a private limited company that was established for the purpose of the acquisition. The latter was funded by a global investment firm that was listed on the New York Stock Exchange and had approximately $367 billion in assets under management.

The company's board proposed a scheme of arrangement that would give effect to the takeover. In approving the scheme under Section 899 of the Companies Act 2006, the High Court noted that the board had unanimously recommended it to shareholders. In accordance with a court order, well-attended meetings had been held of all nine classes of the company's shareholders.

Those meetings resulted in unanimous votes in favour of the scheme, under which shareholders would, at their election, receive cash, shares in the purchaser's parent company or a combination of the two. Careful steps had been taken to keep all shareholders fully informed throughout the process.

The Court was satisfied that all statutory safeguards had been complied with in full, that shareholders were fairly represented at the meetings and that a minority of their number had not been coerced by the majority. There was no blot on the scheme and, overall, it was one that was capable of being reasonably approved by all shareholder classes.

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