In the recent English case McKillen –v- Misland (Cyprus) Investments Ltd (2012) the Court decided that, a principle applicable to pre-emption articles is that, a right to deal freely with a share, is an important attribute of ownership, and prima facie right of a shareholder, and that the existence and extent of restrictions on transfer such as pre-emption rights, shall be clearly stated.
The above case involves -the back-door take over, by the Barclays Brothers of COROIN LTD, the company which owns the hotels Claridge, the Connaught and the Berkeley. The Barclays Brothers, obtained the control of Coroin Ltd, not by acquiring shares directly in Coroin Ltd, which would have been a violation of the pre-emption provisions contained in the Articles of Association of COROIN LTD, and of a Shareholders Agreement, but by acquiring the title of shares in Misland (Cyprus) Investments Ltd, which was a shareholder of Coroin Ltd.
The English court held that the above acquisition was not in breach of the terms of those particular pre-emption rights.
The above English case has made it clear, that the pre-emption rights provisions must expressly contain:
- restrictions on transfer of the legal title of the shares.
- restrictions on transferring, or creating any interest to prevent the transfer of the beneficial interests outside the pre-emption provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.