FGL Holdings: Grand Court Again Rejects Attempts To Deviate From Section 238 Standard Directions

• Published date: 11 January 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation, Shareholders
• Law Firm: Mourant
• Author: Mr Simon Dickson, Jessica Vickers and Adam Barrie

The Grand Court of the Cayman Islands (the Court) has again endorsed the adoption of standard directions in section 238 fair value proceedings¹. The Court refused to expand the scope of disclosure by dissenting shareholders beyond the accepted categories ordered by the Court of Appeal in Re Qunar Cayman Islands Ltd and refused an attempt to subject dissenting shareholders to the information request process. Dissenting shareholders' subjective opinions on fair value are irrelevant. They are not the main focus of the disclosure exercise as they will not hold the lion's share of relevant material to the exercise of determining fair value.

Background

On 7 February 2020, FGL Holdings (FGL), a Cayman Islands exempted company that provides life insurance and annuities products in the United States, announced that it had entered into a merger agreement pursuant to which FGL was taken private and became a subsidiary of Fidelity National Finance, Inc (FNF). The surviving company from the merger (the Petitioner) subsequently petitioned the Court for the determination of the fair value of the dissenting shareholders (the Dissenters) shares pursuant to section 238 of the Companies Act (2020 Revision).

The application

The Petitioner applied to the Court for directions for the future conduct of the proceedings. The directions for section 238 proceedings in the Cayman Islands have become relatively standard over the years in light of Practice Direction 1 of 2019 issued by the Court on 24 February 2019 and subsequent cases such as JA Solar Holdings² and eHi Car Services Limited³. Please refer to our previous briefings on these for more information⁴.

The main issues before the Court at the directions hearing included:

1. Petitioner's disclosure: the Petitioner sought to restrict certain categories of its own disclosure relating to contractual agreements with business partners and investors, as well as its acquisition of Fidelity & Guaranty Life in 2017, on the basis that it would be burdensome to disclose the documents sought. The Dissenters disagreed as their proposals (some of which had been modified throughout the course of negotiations) were reasonable and would capture documents that are relevant to fair value.

2. Dissenters' disclosure: the Dissenters agreed to provide discovery in line with the guidance of the Court of Appeal of the Cayman Islands (the CICA) in Re Qunar Cayman Islands Ltd⁵, by disclosing documents evidencing valuations or similar analyses which were...