Sempacher Foundation v Lark Services Inc. Et Al

Legal Background

Lark Services Inc. (Lark) was incorporated on 12 May 2005 under the International Business Companies Act 1984 (IBCA), with the ability to issue bearer shares.

The BVI Business Companies Act 2004 (BCA) contained transitional provisions which applied to 'grandfathered bearer share companies'. From 1 January 2010, all companies incorporated under the IBCA (IBCs) would be automatically re-registered under the BCA, and, among other things:

the memorandum and articles of association would be deemed as amended to prevent the issue of new bearer shares; the IBC could force the redemption of outstanding bearer shares (Outstanding Bearer Shares); and the rights attaching to any Outstanding Bearer Shares were suspended unless the share had been deposited with an authorised custodian. Factual Background

There were two Outstanding Bearer Shares certificates in Lark, representing 60 shares held by Sempacher Foundation (Sempacher) and 40 shares held by Curatus Trust Company (Mauritius) Limited (Curatus). The Outstanding Bearer Shares in the name of Sempacher had been deposited with an approved custodian.

Lark, having been struck off, was restored to the register on 12 September 2014.

Lark had two professional directors, who worked for the registered agent of Lark (Registered Agent) and they resigned shortly after the restoration, appointing four additional directors (two nominated by each shareholder) (Director Appointments).

Sempacher delivered its bearer shares to the Registered Agent stating that they were to be converted into registered shares.

Curatus alleged that the appointment of additional directors had only been effective in respect of the directors of Curatus (Curatus Directors), so that the Curatus directors had control of the board. The directors refused to issue the registered shares to Sempacher.

Sempacher then voted its shares to direct the Registered Agent to convert its Outstanding Bearer Shares into registered shares, use its majority to remove the Curatus Directors and appoint directors appointed by Sempacher. In so doing, it relied upon section 70(3) of the BCA which provided that, the general suspension of rights does not apply where:

a bearer share in a company is held by the company; the bearer share is to be, or has been converted to, or exchanged for, a registered share, redeemed, purchased or otherwise acquired by the company, or cancelled and forfeited; and the company does not hold the bearer share for or on...