Re Noble Corporation

• Jurisdiction: Cayman Islands
• Judge: (Foster, Ag. J.)
• Judgment Date: 18 June 2009
• Court: Grand Court (Cayman Islands)
• Date: 18 June 2009

Grand Court

(Foster, Ag. J.)

IN THE MATTER OF NOBLE CORPORATION

IN THE MATTER OF NOBLE CAYMAN ACQUISITION LIMITED

C.D. McKie and M.A. Kish for the petitioners.

Cases cited:

(1) Baytrust Holdings Ltd. v. Inland Rev. Commrs., [1971] 1 W.L.R. 1333; [1971] 3 All E.R. 76, referred to.

(2) Brooklands Selangor Holdings Ltd. v. Inland Rev. Commrs., [1970] 1 W.L.R. 429; [1970] 2 All E.R. 76, referred to.

(3) Citizens & Graziers” Life Assur. Co. Ltd. v. Commonwealth Life (Amalgamated) Assur. Ltd.UNK(1934), 51 C.L.R. 422; [1934] ALR 329, considered.

(4) Fallon v. Fellows (Inspector of Taxes), [2001] S.T.C. 1409, referred to.

(5) MyTravel Group plc, Re, [2005] 1 W.L.R. 2365; [2005] 2 BCLC 123; [2005] BCC 457, distinguished.

(6) SIIC Medical Science & Technology Ltd., In re, 2003 CILR 355, referred to.

(7) South African Supply & Cold Storage Co., Re, [1904] 2 Ch. 268; (1904), 73 L.J. Ch. 657, followed.

(8) Stork ICM Australia Pty. Ltd. v. Stork Food Systems Australasia Pty. Ltd.(2006), 25 ACLC 208, considered.

(9) Swithland Invs. Ltd. v. Inland Rev. Commrs., [1990] S.T.C. 448, referred to.

Legislation construed:

Companies Law (2007 Revision), s.86:

‘(1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the Court may, on the application of the company or of any creditor or member of the company, or where a company is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be summoned in such manner as the Court directs.

(2) If a majority in number representing seventy-five per cent in value of the creditors or class of creditors, or members or class of members, as the case may be, present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors or the class of creditors, or on the members or class of members, as the case may be, and also on the company or, where a company is in the course of being wound up, on the liquidator and contributories of the company.’

s.87(1): The relevant terms of this sub-section are set out in para. 9.

Companies-arrangements and reconstructions-‘amalgamation’ or ‘reconstruction’-‘amalgamation’-for purposes of Companies Law (2007 Revision), s.87, ‘amalgamation’ typically scheme involving blending of two concerns into one rather than continuance of one reordered business

Companies-arrangements and reconstructions-‘amalgamation’ or ‘reconstruction’-‘reconstruction’-for purposes of Companies Law (2007 Revision), s.87, ‘reconstruction’ typically scheme by which substantially same business carried on by substantially same persons

Companies-arrangements and reconstructions-‘amalgamation’ or ‘reconstruction’-to adopt purposive, commercial interpretation of terms ‘amalgamation’ and ‘reconstruction’ in Companies Law (2007 Revision), s.87-to consider how schemes would be comprehended by businessmen

The petitioners applied for a ruling whether one of two proposed interdependent schemes of arrangement, in relation to the petitioning companies, constituted an ‘amalgamation’ or a ‘reconstruction’ within the meaning of s.87(1) of the Companies Law (2007 Revision) so that the court would have jurisdiction to sanction it pursuant to s.86(2).

The object of the schemes was to replace the first petitioner with its wholly-owned subsidiary, a company incorporated in Switzerland, as the ultimate holding company of the group, thus moving the location of the parent company from the Cayman Islands to Switzerland. The second petitioner was the wholly-owned subsidiary of the Swiss company and this would be merged with the first petitioner to complete the rearrangement before being subsequently dissolved. In effect, the shareholders of the first petitioner were being asked to exchange their shares for those in the Swiss company on a one-for-one basis.

The petitioners applied to the court pursuant to s.86(1) of the Companies Law to convene a meeting of the shareholders of the first petitioner to consider and approve the scheme and dispense with a meeting in relation

to the second petitioner. The court considered whether it had the jurisdiction to sanction the scheme and so whether it could give directions in relation to the meetings.

The petitioners submitted that when considering the meaning of ‘amalgamation’ and ‘reconstruction’ the court should adopt a purposive and commercial construction as it had done when interpreting other terms in that part of the Companies Law. Adopting this approach would ensure that the proposed scheme would either be an ‘amalgamation’ between the first and second petitioners or a ‘reconstruction’ of the second petitioner since the persons who would be beneficially interested after the scheme would be the same as those currently with a beneficial interest in the business being carried on.

Held, adopting a purposive interpretation and confirming the court”s jurisdiction in respect of the proposed scheme:

It would be appropriate to adopt a broad and purposive approach when interpreting the provisions of ss. 86 and 87 of the Companies Law (2007 Revision) and in particular to the terms ‘reconstruction’ and ‘amalgamation’ since this would be consistent with the approach already taken in relation to other terms in these sections. They were commercial and not legal terms and the court would therefore have to consider how the transactions in each case would be comprehended by businessmen. Even as commercial terms they would have no precise meaning, but in the ordinary sense a ‘reconstruction’ would typically involve a transaction where substantially the same business would be carried on by substantially the same persons, whereas an ‘amalgamation’ would usually involve the blending of two concerns into one rather than merely the continuance of one business that had been reordered. Moreover, the whole transaction should be viewed together rather than looking at its constituent parts since it would be artificial to regard these interdependent schemes in isolation-especially since in the instant case even though one of the companies to be merged had been specifically incorporated to facilitate the schemes and would subsequently be dissolved, it was an integral part of the overall arrangement. Under both schemes of arrangement, the ultimate beneficial ownership of the companies in the group would not change and therefore, in the context of these particular schemes, the merger of the first and second petitioner would be an ‘amalgamation.’ Accordingly, the court would have jurisdiction to make orders under s.87 and, if it wished to, sanction the schemes after the hearing of the petitions (paras. 29–32).

1 FOSTER, Ag. J.: The particular issue which arises for determination in this matter is whether the scheme of arrangement proposed in respect of the second petitioner company constitutes an ‘amalgamation’ or ‘reconstruction’ within the meaning of s.87(1) of the Companies Law (2007 Revision) such that the court would have jurisdiction to sanction it in appropriate circumstances pursuant to s.86(2) and s.87(1)(a), (c) and (d) of the Companies Law.

Background

2 The petitioner companies, Noble Corporation (‘Noble Cayman’) and Noble Cayman Acquisition Ltd. (‘Merger Sub’), petitioned the court together for the sanction of two proposed schemes of arrangement which are interconnected and interdependent upon each other. Both companies are part of the Noble Group, which is a leading offshore drilling contractor for the oil and gas industry. The object of the proposed schemes is to replace Noble Cayman with its wholly-owned subsidiary, a company incorporated under the laws of Switzerland (‘Noble Switzerland’), as the ultimate holding company of the Noble Group, thus moving the...