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Judging Corporate Law II May 31St 2013 University of Pennsylvania

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Judging Corporate Law II May 31St 2013 University of Pennsylvania Judging Corporate Law II May 31st 2013 University of Pennsylvania Law School Organized and moderated by John Armour (Oxford) and Edward Rock (Penn Law) 9.00 am Registration and Coffee 9.30 am Welcome PROFESSOR MICHAEL A. FITTS Dean and Bernard G. Segal Professor of Law, University of Pennsylvania Law School 9.45am Capital Structure I: Legal Capital: What are the constraints on redemption of redeemable shares? How are these constraints imposed, and to what extent may parties modify them by contract? How are questions of valuation of corporate assets approached for the purposes of applicability of these constraints? Barclays Bank plc v British & Commonwealth Holdings plc [1996] 1 BCLC 1 SV Investment Partners LLC v Thoughtworks Inc, (Del. 2011) CHIEF JUSTICE STEELE MR JUSTICE HILDYARD Delaware Supreme Court High Court, Chancery Division 10.45am Capital Structure II: Exchange Offers: What degree of coercion, if any, is it permissible to introduce into an exchange offer to bondholders, in order to overcome hold-out objections? How do/should courts review such offers? Katz v Oak Industries, Inc, 508 A.2d 873 (Del. Ch. 1986) Asseìnagon Asset Management SA v Irish Bank Resolution Corp [2012] EWHC 2090 (Ch), [2013] 1 All ER 495 MR JUSTICE BRIGGS CHANCELLOR STRINE High Court, Chancery Division Delaware Court of Chancery 11.45pm Coffee 12.00pm Piercing the Corporate Veil: What is understood by “piercing the corporate veil”? Is there a judicial power to do this in appropriate circumstances? If so, what do such circumstances look like? Midland Interiors Inc v Burleigh 2006 WL 3783476 (Del. Ch. 2006) VTB Capital plc v Nutritek International Corp [2013] UKSC 5 VICE CHANCELLOR NOBLE LORD JUSTICE MUMMERY J UDGE CAREY Delaware Court of Court of Appeal US Bankruptcy Court, District of Chancery Delaware 1.00pm Lunch 2.00pm Takeover Issues I: Collusion between bidders. What remedies, if any, are available to redress collusion between potential bidders in corporate takeovers? Are these remedies part of competition/antitrust law, part of corporate law, or part of regulatory provisions (e.g. the Takeover Code)? Dahl v Bain Capital Partners (D. Mass. 2013) Principle Capital Investment Trust plc (Takeover Appeal Board, 2010) CHARLES CRAWSHAY HOWARD SHELANSKI MR JUSTICE ROTH Deputy Director General, Director, Bureau of High Court, Chancery Division Takeover Panel Economics, Federal Trade Commission 3.00pm Takeover Issues II: Making a bid using confidential information. What remedies, if any, are available against a party who has made use of confidential information to make a takeover bid? Vercoe v Rutland Fund Management Ltd [2010] EWHC 424 (Ch) Martin Marietta Materials, Inc v Vulcan Materials Company (Del. 2012) JUSTICE JACOBS MR JUSTICE NEWEY Delaware Supreme Court High Court, Chancery Division 4.00pm Close 2 Capital Structure I: Legal Capital [1996] 1 BCLC 1 Barclays Bank plc and others v British & Commonwealth Holdings plc Find out more • Find Related Journals • Find Related Cases • Find Related Commentary CHANCERY DIVISION HARMAN J 11, 12, 13, 14, 17, 18, 19, 21, 24, 25, 26, 27 JANUARY, 26 JULY 1994 COURT OF APPEAL KENNEDY AND ALDOUS LJJ AND SIR ROGER PARKER 10, 11, 12, 28 JULY 1995 Capital – Maintenance of capital – Purchase by company of own shares – Gratuitous disposition of company's assets – Scheme of arrangement approved by the court – Whether banks claiming as creditors – Order of distribution of company's assets in winding up – Companies Act 1985, ss 151–153, 178, 425. C, a major shareholder in the company, wanted to liquidate its holding in the company. To avoid placing a large number of shares on the market the following scheme under s 425 of the Companies Act 1985, which also involved a reduction of capital, was put into effect and approved by the court. C's holding was converted into redeemable shares which were to be redeemed in four tranches. To guarantee that the redemption would take place, C was given the option of selling the shares to T, a company formed for this purpose and financed by a number of banks should the company fail to redeem the shares (the option agreement). As part of the arrangement, the company covenanted with the banks to maintain certain asset rates. After two tranches of the shares had been redeemed, the company went into administration and C exercised its right to have the shares purchased by T. The banks claimed damages against the company for breach of its covenant to them to maintain the agreed asset rates. Also two of the banks brought an action for misrepresentation alleging that the company had misrepresented that it had the necessary asset rates at the time the two banks entered into the transaction. Proceedings were brought under RSC Ord 33, r 3 to determine certain points of law arising from the option agreement. Harman J held in favour of the plaintiffs and the defendants appealed. Held – (per Harman J) Answering the questions posed by the special case: (1) Under the rule in Trevor v Whitworth (1887) 12 App Cas 409 a transaction which involved a return of capital to a company's members in whatever form and under whatever label and whether directly or indirectly was void. The economic effect of the agreement between the company and the banks was that instead of a sum required to redeem the shares being paid out of funds available for distribution to the shareholders and therefore in any liquidation ranking behind the claims of creditors, the sum claimed by the banks as damages would rank equally with the claims of other creditors. Such an arrangement also constituted a breach of the rule in Trevor v [1996] 1 BCLC 1 at 2 Whitworth and accordingly the covenant between the banks and the company was not enforceable. (2) The arrangement between the banks and the company resulted in the damages claimed by the banks constituting a gratuitous distribution of the company's assets at a time when it had no distributable profits and as such was void. (3) Allowing the two banks to claim for damages for misrepresentation rather than for breach of a contractual warranty would be a triumph of form over substance and this claim also failed because of the rule in Trevor v Whitworth. (4) The damages sought to be recovered in the action were not caught by s 178(2) of the Companies Act 1985 as damages in respect of the company's failure to redeem the shares. The measure of damages may have been those computed by the failure of the company to recover the shares but it was not in respect of such failure that such damages were sought to be recovered. (5) 'Indemnity' in s 152(1)(a)(ii) of the 1985 Act bore a technical meaning and entailed a contract by one party to keep the other party harmless against loss. There was nothing in any of the transactions which the court had to consider that constituted an indemnity and accordingly there was no financial assistance within the meaning of s 152(1)(a)(ii). (6) However, as the scheme and the option agreement had been approved by the court, on accepted principles the court's order stood until it had been set aside or rescinded by some valid judicial process. Held – (per Court of Appeal: appeal dismissed) (a) The phrase 'damages in respect of any failure on its part to redeem or purchase . shares' in s 178(2) was concerned with claims for damages for breach of a company's duty to redeem its shares. The damages claimed by the plaintiffs in the present case were in respect of breaches by the company of covenants in the financing agreements between the company and the plaintiff and they were not caught by the section. (b) The arrangement between the plaintiffs and the company which could result in an action in damages against the company did not constitute the giving of an indemnity within the meaning of s 152(1)(a)(ii). Indemnity had a recognised technical meaning, namely, a contract to keep another harmless against loss, and the claim by the plaintiffs did not involve any such arrangement. (c) The principles of law which affected a company's right to buy its shares and give away property cannot and did not prevent the company from making representations relied on by the relevant plaintiffs nor prevent it from being liable for any consequences should the representations give rise to legal liability. (d) By virtue of the scheme, the option agreement was binding on the company and the administrators were in the same position as the company. Cases referred to in judgments A and C Constructions Pty Ltd, Re [1970] SASR 565, SA Sup Ct. Ackbar v C F Green & Co Ltd [1975] 2 All ER 65, [1975] QB 582, [1975] 2 WLR 773. [1996] 1 BCLC 1 at 3 ANZ Executors and Trustee Co Ltd v Qintex Australia Ltd (1990) 2 ACSR 676, Qld SC. Australasian Oil Exploration Ltd v Lachberg (1958) 101 CLR 119, Aust HC. Aveling Barford Ltd v Perion Ltd [1989] BCLC 626. Bank of New South Wales v Commonwealth (1948) 76 CLR 1, Aust HC. Birmingham and District Land Co Ltd v London and North Western Rly Co (1886) 34 Ch D 261. Brady v Brady [1988] BCLC 579, [1988] 2 All ER 617, [1989] AC 755, [1988] 2 WLR 1308, HL; rvsg [1988] BCLC 20, CA. Burton v Palmer [1980] 2 NSWLR 878, NSW SC. Charterhouse Investment Trust Ltd v Tempest Diesels Ltd [1986] BCLC 1. Chuck v Cremer (1846) 1 Coop temp Cott 338, 47 ER 884. Davis Investments Pty Ltd v Comr of Stamp Duties (NSW)(1958) 100 CLR 392, Aust HC.
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