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Pt Satria Tirtatama Energindo -v- East Asia Company Limited and Bali Energy Limited [2016] SC (Bda) 90 Com (21 October 2016)

October 2016 ContractsBye-lawShareholder DisputesCompaniesRectification of Share Register

BERMUDA

SUPREME COURT

APPLICATION FOR RECTIFICATION OF SHARE REGISTER IN FAVOR OF PURCHASER UNDER S67 OF COMPANIES ACT, 1981 -WHETHER CONTRACT FOR SALE OF SHARES – WHETHER NOTICES CONVENING BOARD MEETINGS TO APPROVE SALE AND TRANSFER OF SHARES WERE DEFECTIVE – WHETHER PURCHASER CAN RELY ON INDOOR MANAGEMENT RULE – WHETHER DIRECTORS IN BREACH OF FIDUCIARY DUTY TO SELLER – WHETHER COMPANY HAS ALREADY EXERCISED ITS DISCRETION TO REFUSE REGISTRATION

PT Satria Tirtatama Energindo (“PT Satria”) is part of an Indonesian conglomerate whose business includes the development of geothermal energy sites in Indonesia. PT Satria and East Asia Company Limited (“EACL”) entered into discussions surrounding the purchase of Bali Energy Limited (“BEL”), these discussions culminated in the execution of a Heads of Agreement (“HOA”). A key term of the HOA provided that EACL would sell 100% of its shares in BEL and that PT Satria agreed to purchase the shares outright.

PT Satria sought an order for rectification of the share register of BEL to record that the shares in the company were no longer held by EACL, but by PT Satria. Counsel for BEL and EACL objected on the basis that: (i) the HOA was no more than an agreement to agree and did not constitute an enforceable agreement, (ii) the directors did not possess the requisite authority to bind the companies; (iii) the notices to convene the board meetings of EACL and BEL, where the agreement was executed, were defective and (iv) the directors of EACL and BEL breached their fiduciary duty to the companies by not disclosing personal financial interests in the HOA.

Hellman J ordered the rectification of the register as requested and in doing so he held that it was plain from the language of the HOA that the parties intended to be bound by the HOA (which included all the terms necessary for the agreement to be workable). Further, while under the bye-laws the directors of EACL did not have authority to conclude the HOA without a resolution of the Board, the bye-law requirement was satisfied when the Board gave retrospective approval. In relation to the notices of the meeting, Hellman J held that holding the meeting by Skype was a valid means of communication sanctioned by the bye-laws and that any complaint that the board meetings were held on short notice could have resulted in an injunction (if failing to do so, the assigned time and date of the meeting were accepted). Finally, Hellman J accepted that the HOA did not give rise to any new contractual benefits to the directors of EACL and BEL, but merely secured the payment of BEL’s existing contractual obligations toward them.

 

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Pt Satria Tirtatama Energindo -v- East Asia Company Limited and Bali Energy Limited [2016] SC (Bda) 90 Com (21 October 2016)

 

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