Shareholders Approving a Takeover May Nevertheless Apply for Appraisal
In Shkolnik v Kniel Drinks Packaging the Tel Aviv District Court considered whether shareholders in a publicly traded company who voted in favor of a takeover offer at a specific price, are later allowed to be included in the shareholder group for the purposes of a class action filed for the fair assessment of the value of the sold shares .
The issue in Shkolnik was an offer for the purchase of Kniel‘s entire outstanding share capital, that was accepted by the required majority of the selling shareholders. As a preliminary question in the class action lawsuit, the court had to decide if the shareholders that approved the sale might later be included in the group seeking an appraisal remedy.
Honorable Judge Ruth Ronen held in favor of the plaintiffs and allowed the participation of all shareholders to whom the takeover bid was made in the class action group, regardless of whether they agreed or opposed the offer.
Judge Ronen referred to S 338 A of the Companies Act 5759-1999, and held that the correct reading of S 338 is that any offeree, regardless of his vote, may petition the court for an appraisal remedy. Judge Ronen added that the potential uncertainty caused to the offeror by the fact that the majority of the shareholders may approve the sale but then claim it was unfair, can be balanced by a judicial presumption that the approval of the sale is a strong indication of the fairness of the takeover offer price.
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