There has been an increasing amount of M&A transaction
activity in the Bermuda re/insurance market in recent years.
As part of that M&A activity, the Bermuda market has
witnessed a notable increase in 'hostile' takeover
activity, whereby activist investors or rival companies have made
unsolicited offers to acquire target Bermuda re/insurance
In some cases, the target company's board has no intention
of promoting a sale of the target company (whether to that
particular bidder, or at that particular time). In other cases, the
target company's board does have an interest in promoting and
effecting a sale of some sort, but it will have already identified
what it considers to be the most suitable purchaser in the market.
The transaction might then be in an advanced stage of negotiations
with the preferred purchaser, when the emergence of a rival,
hostile bid may undermine the successful completion of those
Hostile takeover attempts are often pursued in conjunction with
active litigation strategies, which are designed to put pressure on
the target company's board of directors to accept the merits of
the hostile bid and to recommend it to the company's
shareholders, or to put the hostile bid to a full shareholder vote
in a general meeting, regardless of the board's own view of its
The Bermuda Court has significant experience of managing and
resolving hostile takeover litigation, as well as other corporate
disputes involving Bermuda companies.
The Bermuda Court's experience has included:
Applications for sanction to promote,
and seek court approval for, a binding Scheme of Arrangement
(whereby, if successful, the target company could be required to
complete an M&A transaction if supported by a majority of
shareholders, notwithstanding opposition by the board of directors
and a minority of shareholders).
Claims against directors, alleging
breaches of fiduciary and statutory duty, conflicts of interest and
applications for associated injunctive relief.
Consideration of the validity of
'poison pill' provisions in Bermuda company bye-laws.
Applications for disclosure of
company information, including details of the target company's
ultimate beneficial owners for the purpose of communicating with
shareholders and gathering the necessary shareholder support.
Applications for the appraisal of the
value of minority shares that are the subject of compulsory
The Bermuda Court has recognized that hostile takeover
litigation strategies face considerable obstacles, both legally and
In its judgment in the case of Validus Holdings Ltd v IPC
Holdings Ltd and Max Capital Group Ltd  Bda LR 30, the
Bermuda Court noted the various "practical difficulties
with a hostile [Scheme of Arrangement] process", and it
also indicated that "as a matter of principle, [the Court]
should not initiate [the Scheme of Arrangement] process on the
application of a bidder without some real and solid indication of
independent shareholder support to show that it has some reasonable
hope of success".
The Bermuda Court has recognized, however, the theoretical
possibility that a hostile takeover, might succeed in exceptional
circumstances by way of a Scheme of Arrangement under Bermuda's
Companies Act 1981. As a result, hostile takeover strategies
continue to be actively considered and explored in Bermuda.
There is a risk that hostile takeover litigation strategies
might be implemented in ways which amount to an abuse of the
court's process. For example, a hostile takeover bid (and
associated court proceedings) might be entirely frivolous or
speculative, or motivated by a desire to delay, disrupt, or extract
confidential information about another pending transaction.
Fortunately, the Bermuda Court has a wide range of rules and
powers that enable it to strike out or summarily dismiss
unmeritorious applications, and to make appropriate costs orders
(thereby deterring the pursuit of frivolous proceedings, and
enabling the pursuit of meritorious claims). The Commercial Court
has also indicated a willingness to deal with corporate disputes on
an expedited basis, if the parties and the commercial circumstances
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.
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