Cayman Court Of Appeal Provides Important Guidance On Leave To Appeal To The Privy Council In Re Changyou.com Limited

• Published date: 04 April 2023
• Subject Matter: Corporate/Commercial Law, M&A/Private Equity, Corporate and Company Law, Shareholders
• Law Firm: Conyers
• Author: Mr Erik Bodden, Alecia Johns, Rowana-Kay Campbell and David Lamb

On 20th December 2022, the Cayman Islands Court of Appeal ("CICA") delivered its second judgment in the matter of Changyou.com Limited v Fourworld Global Opportunities Fund Ltd & others ("Changyou.com case"). The CICA provided guidance on the distinction between an interlocutory and a final decision for the purpose of determining whether an appeal lies to the Judicial Committee of the Privy Council ("Privy Council") as of right.

Pursuant to section 3(1)(a) of the Cayman Islands (Appeals to Privy Council) Order 1984 ("CI Appeal Order"), appeals lie to the Privy Council as of right in respect of certain 'final' decisions in civil proceedings. However, if the decision is interlocutory, leave to appeal is generally required pursuant to section 3(2) of the CI Appeal Order ("discretionary leave").

Background of the Changyou.com case

Minority shareholders ("Petitioners") of Changyou.com Limited ("Changyou") filed a petition in the Cayman Islands Grand Court ("Grand Court") against Changyou, after Changyou merged with its parent company in 2020. The merger was a "short-form merger" pursuant to section 233(7) of the Companies Act (i.e. a merger between a parent company and a subsidiary where the parent holds shares carrying 90% or more of the voting rights in the subsidiary). "Short-form mergers", in contrast to "long-form mergers", do not require a special resolution of the members of each constituent company (provided that a copy of the plan of merger is given to every member of the subsidiary).

The Petitioners sought the Grand Court's appraisal of the fair value of their shares pursuant to section 238 of the Companies Act. The Grand Court, with the consent of the parties, ordered a trial, as a preliminary issue of the question whether a dissenting shareholder in a short-form merger was entitled to petition the court to have the fair value of their shares appraised by the court pursuant to section 238 of the Companies Act.

The Grand Court concluded, in an Order dated 15 April 2021, that: (i) dissenting shareholders in a short-form merger, effected pursuant to section 233(7) of the Companies Act, are entitled to have the fair value of their shares appraised by the court pursuant to section 238 of the Companies Act; (ii) dissenting shareholders must give notice of dissent within 20 days of receiving the copy of the plan of merger (effectively re-writing the Companies Act); and (iii) the Petitioners had taken the necessary steps to dissent from Changyou's merger...