On 27 March 2025, the Eastern Caribbean Supreme Court, sitting in the Territory of the Virgin Islands, handed down its decision in BVIHCMAP2024/0002 Amstel Investment Holdings Limited and others v AMS Holdings Limited and others in which Conyers represented the successful Respondents.
The judgment is of significant importance to the BVI because this is the first decision in which the BVI Court of Appeal was asked to consider the ruling in Re Sunrise Radio [2009] EWHC 2893 (Ch) on whether a debt-for-equity swap carried out at an undervalue necessarily constituted unfair prejudice. It is also the Court of Appeal’s most recent decision considering the relevant principles governing an unfair petition under section 184I of the BVI Business Companies Act.
On the question of whether a debt-for-equity swap carried out at an undervalue was necessarily unfairly prejudicial, the Court of Appeal held that on a proper analysis of Re Sunrise Radio — a decision relied upon by the appellants — it could not be said that the compulsory redemption of a shareholder’s shares at an undisputed significant undervalue was necessarily unfairly prejudicial. The Court held that the determinative factor in that case was the breach of fiduciary duty, which constituted the unfairness and not the value.
The Court found that the principle which ought to be derived from Re Sunrise Radio was that a share issuance or dilution at an undervalue would only be unfairly prejudicial if the directors also breached their fiduciary duties by failing to properly assess the price at which the share issuance should occur.
In dismissing the appeal, the Court of Appeal rejected the appellants’ argument that the mere dilution of a minority shareholding at an undervalue constituted unfairly prejudicial conduct. In doing so, the learned Mr Justice Ward, giving the decision of the panel, held that such a proposition was overly broad. If accepted, it would mean that any instance where the minority shareholder converts debt for equity or issues new shares at an undervalue would amount to unfair prejudicial conduct without more. The Court said that such an approach disregarded the well-established principle that whether the conduct complained of was unfairly prejudicial must be assessed on the specific facts and circumstances of each case rather than by reference to any predefined rule.
In relation to petitions under section 184I of the BVI Business Companies Act, the Court held that in determining an unfair prejudice claim under section 184I, its mandate was to achieve fairness in a just and equitable manner, applying judicial discretion based on rational principles and that the context and background of the case must shape the concept of fairness. The Court identified two key features to consider when assessing unfair prejudice. First, whether the company’s affairs are regulated by its articles of association and, in some cases, by collateral agreements between shareholders (the legal background). Second, there may be cases where equitable considerations prevented those in control of the company from insisting on their strict legal rights.
By rejecting the notion that unfairly prejudicial conduct can be established solely by issuing shares at an undervalue and reaffirming the importance of context, the decision should be commended for placing unfair prejudice claims in their proper framework entirely dependent on the circumstances of each case, with fairness as the Court’s guiding principle.
Tameka Davis, Andre Sheckleford, Grainne Hussey of Conyers, and Ben Woolgar of Brick Chambers represented the successful Respondents.
