The Appleby 2012 Offshore Round-Up: Company Law

Welcome to Appleby's review of the key company law decisions handed down in the leading offshore jurisdictions during 2012, compiled by members of our Litigation & Insolvency Practice Group in Bermuda, the British Virgin Islands, the Cayman Islands, Jersey, Guernsey and the Isle of Man. Equivalent updates are available in the areas of insolvency & restructuring, fund disputes, civil procedure and trust litigation. Copies may be obtained from our website or from your usual Appleby contact.

2012 saw interesting decisions from Jersey on when a minority shareholder can invoke unfair prejudice remedies and when a derivative action is appropriate, from Bermuda on cross-border issues arising in offshore companies that are listed elsewhere and from BVI on derivative actions, as well as a stern message from the Guernsey Court to directors who turn a blind eye to financial crime.

Derivative Actions - Authorized and Unauthorised

In the BVI, on the issue of shareholder disputes, 2012 began with an oral decision of the Court of Appeal in Liao v. Upbeat Global BVICVAP 2011/0034. After striking out an appeal brought in the name of a company by a person without the authority of the board to bring it, the Court decided that it had an inherent jurisdiction to make costs orders against persons outside of the jurisdiction in cases where it was necessary to do so to protect the integrity of the processes of the Court from abuse.

The year also saw the first two reported decisions of the Court in relation to the power under section 184C of the BVI Business Companies Act 2004 to give leave to commence derivative proceedings. In Nigel Gray v. Leddra BVI HCM 2011/79, Bannister J decided that it was an abuse of the process to purport to bring derivative proceedings, without the permission of the Court first being obtained, and struck out those parts of the claim which were brought derivatively. In November 2012, Bannister J decided in Microsoft Corporation v. Vadem BVI HCM 2012/0048 that the jurisdiction under section 184C permitted only single, not double derivative claims to be brought. An argument that a foreign law could be relied upon, which permitted the bringing of double derivative proceedings, was rejected.

In the Cayman Islands, where there is authority that double derivative actions are permitted, on 6 November 2012, Foster J delivered an extensive judgment in respect of what is believed to be the first derivative action in the jurisdiction that has proceeded to trial, Renova Resources Private Equity Ltd v. Gilbertson and others. The claim was brought by an entity of Viktor Vekselberg's Renova group against South African businessman Brian Gilbertson. It was alleged that Mr Gilbertson had breached the fiduciary duty he owed to a Cayman exempt limited company, established as part of a joint venture investment fund between Mr Vekselberg and Mr Gilbertson, by diverting a business opportunity relating to the rights in the Fabergé brand in January 2007. The case largely turns on its own detailed facts and is not of particular legal significance, although it contains an extensive discussion of the law on fiduciary duties and brings Cayman law into line with the law of England and Wales in relation to claims in knowing receipt. In the event, the plaintiff prevailed on liability but was awarded no relief against Mr Gilbertson.

Minority Shareholder Remedies

The Bermuda Court dealt with a series of cases that required an examination of the role of Bermuda minority oppression remedies in the context of foreign listed/regulated Bermuda companies.

In Kingboard Copper Foil Holdings [2012] SC (Bda) 5 Com (16 January 2012) the Court considered an application to...