S238 in action: CICA clarifies approach to 'fair value' appraisal proceedings in Trina Solar Limited
S238 发挥作用：开曼群岛上诉法院在天合光能一案中阐明了应对“公允价值”估定诉讼程序的处理方法
在天合光能有限公司一案中，开曼群岛上诉法院（以下简称“CICA”）就《公司法（修订版）》第 238 条之适用情况作出了意义重大的判决。本案更新信息可结合我们之前的文章一起阅读，其中列出了在“公允价值”估定诉讼程序中需要注意的实务要点。
The Cayman Islands Court of Appeal ("CICA") has delivered a valuable judgment on the application of section 238 of the Companies Act (as revised) in Re Trina Solar Limited.[1] This case update can be read in conjunction with our previous briefing setting out certain practical points to note in 'fair value' appraisal proceedings.
The Background
Trina Solar Limited (the "Company") was incorporated in the Cayman Islands as a listing vehicle to take Changzhou Trina Solar Energy Co Limited public on the New York Stock Exchange.
In December 2015, a group of investors, including the founder of the Company, its chairman and its CEO, offered to acquire the Company at US$11.60 per American Depository Share or ADS ("Merger Price"). An independent Special Committee was appointed to evaluate the fairness of the offer, and it approved and recommended it to shareholders.
At an EGM held in December 2016, 97.8% of shareholders voted in favour of the merger, and it was completed in March 2017. However, 2.2% of shareholders did not approve of the Merger Price and exercised their statutory right (under s 238 of the Companies Act) to have the fair value of their shares determined by the Grand Court of the Cayman Islands ("Dissenters").
When the dispute came before Segal J (the "Judge") at the Grand Court, 'fair value' was determined to be marginally higher than the Merger Price, or US$11.75 per ADS. This was based on a weighting of 30% adjusted trading price, 45% Merger Price, and 25% discounted cash flow ("DCF").
The Dissenters appealed to the CICA on the basis that the fair value of their shares was in fact much higher. The CICA allowed the Dissenters' appeal, rejecting the Grand Court's finding on fair value and its reliance on the Merger Price. The CICA placed a 30% weighting on adjusted trading price, a 70% weighting on a positively adjusted DCF valuation, and no weighting at all on Merger Price.
The CICA's decision provides important guidance on the circumstances in which Cayman courts will disregard the merger price in determining fair value; the weight that should be given to adjusted trading price and DCF valuations; and the importance of full and frank disclosure in section 238 proceedings.
1. Merger Price
The CICA confirmed that the following factors are relevant when considering whether the merger price provides a reliable indicator of fair value:
- the availability of robust public information;
- easy access to non-public information;
- a robust market check;
- a special committee comprised of independent directors; and
- any conflicts related to the transaction.
The Dissenters' principal submission was that the Judge had erred in according a weighting of 45% to the Merger Price because the merger was determined in a manner that made it an unreliable indicator of fair value. The CICA agreed with the Dissenters, finding that the flaws in the deal process were so significant that the Merger Price should not be given any weight at all. More specifically, there were deficiencies in the market check process, potential conflicts of interest in respect of the management buyout, concerns about the independence of the Special Committee, flaws in the fairness opinion obtained by the Special Committee, and incomplete factual evidence provided by the Company.
In such circumstances, the Court reasoned that the only reasonable decision was to give the Merger Price zero weighting. To do otherwise would be to create a substantial risk that companies in future will 'not be open and transparent about all relevant evidence'.
2. Weight given to Adjusted Trading Price/Market Price[2]
The CICA confirmed that the Court may rely on the adjusted trading price or market price of a company only if it is satisfied that the market is semi-strong efficient[3] and there is no material non-public information ("MNPI"). Whether it will be right to do so in a particular case depends on the circumstances.
Although the CICA did not overturn the Judge's finding that the market for the Company's ADS's was semi-strong efficient or that there had been no MNPI in respect of the Company's likely sales, it observed that the Company had failed to provide proper disclosure or produce a witness who could assist with questions concerning its management projections. The CICA remarked that the Company had escaped lightly in avoiding adverse inferences resulting from these failures.
3. DCF Valuation[4]
The CICA clarified that if there is evidence before the Court that raises an issue as to the appropriateness of certain assumptions or forecasts in management projections, the Court must consider the evidence of all parties and reach its own decision on the most realistic forecast.
The CICA expressly rejected the proposition that the Court can only vary a forecast in management projections if the forecast is shown to be "…obviously wrong, careless or tainted by an improper purpose". This sets the bar too high. The court is perfectly entitled to conclude that the best forecast is that put forward by the expert witness or lies somewhere between the management projections and that of the expert witness. On the facts, the CICA found that the Judge's decision to proceed on the basis of the selling prices in the management projections was outside the band of decisions reasonably open to him.
The Dissenters further challenged the discount rate that should be applied to the future cashflows. They argued that the Judge had erred in applying a premium to compensate for the risks of investing in a "higher risk" country like China; in applying a premium to reflect risks relating to the size of the Company; and in estimating the future pre-tax cost of debt of the Company.
While acknowledging that the Judge's findings could have been better expressed, the CICA rejected these challenges to the Judge's discounts. The CICA ruled that it was not for an appellate court to substitute their own discretion for that of the judge by undertaking a narrow textual analysis of a judgment.
4. The Importance of Disclosure
The CICA went on to make several remarks about the importance of full and frank disclosure in section 238 proceedings. It emphasized that it is the Company and its financial advisers, rather than the dissenting shareholders, who have the burden of ensuring that the Court is privy to all relevant information. Companies can be expected both to comply with wide ranging discovery orders, and to produce a witness with first-hand knowledge of the merger transaction.
The CICA also stated that dissenting shareholders should not normally need to apply for specific or further discovery. As a matter of course, companies can be expected to disclose all of the information that a court might require to reach its own decision on fair value.
Conclusion
The CICA's decision is a timely reminder that companies must carefully consider the fair value of any merger or acquisition transaction, particularly in a management buyout scenario. Companies should also be prepared to meet wide-ranging disclosure obligations and to justify their various processes to the court.
Carey Olsen has extensive experience assisting clients navigate mergers and appraisal actions in offshore jurisdictions.
[1] CICA (Civil) Appeal No. 009 of 2021. Judgment delivered on 4 May 2023.
[2] The price at which shares were trading on the relevant stock market adjusted to remove the effect of the offer to acquire at the Company at a known price.
[3] A "semi-strong efficient" market is a market where all publicly available information concerning a company is quickly impounded into the company's stock price.
[4] A prediction of future cash flows with the application of a discount rate to translate the same into a present capital value.
背景
天合光能有限公司（以下简称“公司”）注册成立于开曼群岛，作为常州天合光能有限公司在纽约证券交易所上市的工具。
2015 年 12 月，包括公司创始人、董事长和首席执行官在内的一群投资者主动提出以每股美国存托股（以下简称“ADS”）11.60 美元的价格（以下简称“合并价”）收购该公司。为此，一个独立特别委员会受命评估该要约的公平合理性，之后其便批准并向股东建议了该要约。
在 2016 年 12 月召开的临时股东大会 (EGM) 上，97.8% 的股东投票赞成此次合并，随后于 2017 年 3 月完成了此次合并。 但仍有 2.2% 的股东（以下简称“持异议者”）不同意该合并价，并行使了其根据《公司法》第 238 条享有的法定权利，要求开曼群岛大法院确定其股份的公允价值。
该争议已在大法院提交 Segal J（以下简称“法官”）审理，随后确定“公允价值”为每股 ADS 11.75 美元，略高于合并价。这一决定的依据是基于以30%调整后的交易价格、45%合并价，以及25%折现现金流（以下简称“DCF”）的权重计算。
持异议者认为其股份的实际公允价值要高得多，并据此向 CICA 提出了上诉。CICA 准予持异议者上诉，并拒绝接受大法院对公允价值的裁定结果及其对合并价的依赖。CICA 的计算给予调整后交易价格30%的比重以及给予正向调整的 DCF 估值为依据70%的比重，而完全没有给予合并价任何比重。
CICA 的判决为以下事项提供了重要指导：在什么情况下开曼群岛法院在确定公允价值时无需考虑合并价；应当给予调整后交易价格和 DCF 估值的权重；以及在第 238 条诉讼程序中全面、诚实披露的重要性。
1. 合并价
CICA 确认，在考虑合并价是否真实指示了公允价值时，以下因素与之密切相关：
- 是否可以获取有力的公开信息；
- 是否有方便查阅的非公开信息；
- 市场是否核查可靠；
- 由独立董事组成的特别委员会；以及
- 与交易相关的任何冲突。
持异议者的主要意见是，法官给予合并价45% 的比重的做法有误，因为合并的确定方式致使其成为不可靠的公允价值的指标。CICA 认同持异议者的观点，并认定交易流程存在重大缺陷，因而根本不应该对合并价进行任何加权。更具体而言，市场核查流程存在缺陷、管理层收购存在潜在利益冲突、特别委员会的独立性存疑、特别委员会就公平合理性获得的意见存在瑕疵，以及公司提供的事实证据不完整。
在这种情况下，CICA认为，不给予合并价任何比重才是唯一合理的决定。反之将产生巨大风险，即公司未来将“不会诚实公开所有相关证据”。
2. 给予调整后交易价格/市场价格的权重1
CICA 确认，只有在法院确信市场半强式有效2， 且无重大非公开信息（以下简称“MNPI”）的情况下，法院才能依赖公司的调整后交易价格或市场价格。是否应依赖公司的调整后交易价格或市场价格要视乎具体情况而定。
尽管 CICA 没有推翻法官的判决，即公司的 ADS 市场半强式有效，或公司的可能销售额不存在 MNPI，但其注意到，公司没有作出适当的披露，也没有提供证人来协助解答有关其管理层预测的问题。CICA 表示，公司侥幸逃脱，避免了因这些失败而产生的不利推论。
3. DCF 估值3
CICA 澄清，如果提交法院的证据致使管理层预测中的特定假设或设想的适当性存疑，法院必须审议各方的证据，并依据最贴合实际的设想作出判决。
CICA 明确拒绝采纳以下主张：只有在管理层预测中的某一设想被证实“......明显错误、随意或具备不当目的”的情况下，法院才能更改管理层预测中的预估。这一主张把门槛设置得过高。法院完全有权推断出，专家证人提出的预估，或是介于管理层预测和专家证人预测之间的预估才是最佳的预估。根据事实，CICA 认定，法官判决以管理层预测中的出售价继续合并超出了他的合理判决权范围。
持异议者进一步质疑应当对未来现金流应用的贴现率。其辩称，法官的错误如下：采用溢价来补偿在中国这样的“高风险”国家投资所产生的风险；采用溢价来反映与公司规模相关的风险；以及预估公司未来的税前债务成本。
尽管 CICA 认为法官的判决表述可以更完善，其仍拒绝对法官认定贴现率的质疑。CICA 裁定，上诉法院不能通过对判决进行狭义的文本分析来用自己的自由裁量取代法官的自由裁量。
4. 披露的重要性
CICA 后续就在第 238 条诉讼程序中全面、诚实披露的重要性提出了几点意见。 其强调，确保法院了解所有相关信息的责任人是公司及其财务顾问，并非持不同意见的股东。公司既需要遵守内容广泛的披露命令，也需要提供掌握合并交易第一手信息的证人。
CICA 还表示，持不同意见的股东通常不必申请进行特定或进一步披露。自然而然，公司应披露法院就公允价值作出判决可能需要的所有信息。
结语
CICA 的判决作出了及时的提醒，公司必须谨慎考虑任何并购交易中股份的公允价值，尤其是在管理层收购的情况下。公司还应做好充分准备来履行内容广泛的披露义务，并向法院证明其各种程序正当合理。
凯瑞奥信在协助客户在离岸司法管辖区应对并购和估价诉讼方面拥有丰富经验。
[1] 股票在相关股票市场上的交易价格接受了调整，以此消除以已知价格收购公司的要约所产生的影响。
[2] 市场“半强式有效”是指在市场上，有关一家公司的所有公开可用信息会迅速影响公司的股价。详见判决 [45-48]。
[3] 应用贴现率预测未来现金流，以此将未来现金流转化为资本现值。
