PROPOSAL 2: APPROVAL OF AMENDMENT TO ARTICLES OF ASSOCIATION TO AUTHORIZE THE ISSUANCE OF A NEW CLASS OR CLASSES OF SHARES, INCLUDING PREFERENCE SHARES, SUBJECT TO THE LIMIT ON THE AUTHORITY OF THE BOARD OF DIRECTORS TO ALLOT NEW SHARES OF THE COMPANY SET FORTH THEREIN AND MAKE OTHER NON-SUBSTANTIVE CHANGES
The Board of Directors unanimously recommends that shareholders vote “FOR” the adoption of the following resolution:
RESOLVED THAT, with effect from the end of the GM, the articles of association produced to the meeting and signed by the Chairperson for the purpose of identification, are adopted as the articles of association of the Company in substitution for, and to the exclusion of, the Company’s existing articles of association.
What am I voting on?
The Board of Directors is proposing that the shareholders approve an amendment (the “Amendment”) to the Company’s articles of association (as amended, the “Amended Articles”) to authorize the issuance of a new class or classes of shares, including preference shares, with nominal value in any currency and with, or having attached to them, such powers, designations, preferences, voting rights, rights and terms of redemption, and relative participating, optional or other special rights and qualifications, limitations and restrictions attaching thereto as the Board of Directors may determine, including rights to (a) receive dividends (which may include rights to receive preferential or cumulative dividends), (b) distributions made on a winding up of the Company and (c) be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of shares, at such price or prices (subject to the Act) or at such rates of exchange and with such adjustments as may be determined by the Board of Directors. Any such issuance will be subject to the limit on the authority of our Board of Directors to allot new shares of the Company which is set out in the Amended Articles and which limits such allotments to an aggregate nominal value of $30 million.
In addition, certain other non-substantive changes have been included in the Amended Articles.
What are the reasons the Board of Directors is recommending the Amendment?
The Board of Directors has determined that having the ability to issue a new class or classes of shares, including preference shares, would facilitate corporate financing and other plans of the Company, which are intended to foster its growth and flexibility. If the Amendment is approved, the Board of Directors will be permitted to approve the issuance of a new class of shares, including preference shares, from time to time for any proper corporate purpose, including acquisitions of other businesses and the raising of additional capital. Such new class of shares could be issued publicly or privately, in one or more series that could rank senior to our ordinary shares with respect to dividends and liquidation rights.
There are no present plans, understandings or agreements for, and the Company is not engaged in any negotiations that will involve the issuance of any new class of shares, including preference shares.
What are some of the possible effects of the proposed Amendment?
The new class or classes of shares authorized by the Amendment may generally be issued from time to time for such proper corporate purposes as may be determined by our Board of Directors or, as required by law or the rules of the NYSE, with the approval and authorization of our shareholders. Our Board of Directors does not intend to solicit further shareholder approval prior to the issuance of such new class or classes of shares, except as may be required by applicable law or by the rules of the NYSE.
The possible future issuance of a new class or classes of shares could affect holders of our ordinary shares in a number of ways. Upon conversion into ordinary shares, shares issued with conversion rights could cause
dilution of the ownership interests and the voting power of existing holders of our ordinary shares. Issuance of a new class or classes of shares may also affect the number of dividends, if any, paid to such shareholders and may reduce the share of the proceeds they would receive upon the future liquidation, if any, of the Company.
In addition, the future issuance of a new class or classes of shares could:
dilute the market price of our ordinary shares if the issuance consists of securities convertible or exercisable into ordinary shares, to the extent that the securities provide for the conversion or exercise into ordinary shares at prices that could be below current trading prices of the ordinary shares, which dilution may increase the volatility and affect the market value of our ordinary shares; and
make the payment of dividends on ordinary shares, if any, potentially more expensive.
Could the proposed Amendment have anti-takeover effects?
Although the proposed Amendment is not motivated by anti-takeover concerns and is not considered by our Board of Directors to be an anti-takeover measure, the availability of a new class of shares, including preference shares, could enable the Board of Directors to issue shares defensively in response to a takeover attempt or to make an attempt to gain control of the Company more difficult or time-consuming. It should be noted that any action taken by the Board of Directors to discourage an attempt to acquire control of the Company might result in shareholders not being able to participate in any possible premiums which might be obtained in the absence of anti-takeover provisions.
If shares of a new class are issued, approval by holders of such shares, voting as a separate class, could be required prior to certain mergers with or business combinations by the Company. These factors could discourage attempts to purchase control of the Company even if such change in control may be beneficial to holders of ordinary shares. Moreover, the issuance of shares of a new class having general voting rights together with the ordinary shares to persons friendly to the Board of Directors could make it more difficult to remove incumbent directors and management from office even if such changes would be favorable to shareholders generally. Further, the authorized shares could be used by the Board of Directors for adoption of a shareholder rights plan or “poison pill.”
If a new class of shares are issued with conversion rights, the attractiveness of the Company to a potential tender offeror for the ordinary shares may be diminished. The purchase of the additional ordinary shares or convertible shares necessary to gain control of the Company may increase the cost to a potential tender offeror and prevent the tender offer from being made even though such offer may have been desirable to many of the holders of ordinary shares.
While the ability of the Board of Directors, without any additional shareholder approval, to issue a new class of shares with such powers, designations, preferences, rights, qualifications, limitations and restrictions as determined by the Board of Directors could be employed as an anti-takeover device, the amendment is not intended for that purpose and is not proposed in response to any specific takeover threat known to the Board of Directors. Furthermore, this proposal is not part of any plan by the Board of Directors to adopt anti-takeover devices and the Board of Directors currently has no intention of proposing anti-takeover measures in the near future. In addition, any such issuance of a new class of shares in the takeover context would be subject to compliance by the Board of Directors with applicable principles of fiduciary duty, including their duties under the Act.
The Board of Directors believes that the financial flexibility offered by the ability to issue a new class of shares outweighs any of its disadvantages. To the extent the proposal may have anti-takeover effects, the proposal may encourage persons seeking to acquire the Company to negotiate directly with the Board of Directors, enabling the Board of Directors to consider the proposed transaction in a non-disruptive atmosphere and to discharge effectively its obligation to act on the proposed transaction in a manner that best serves all the
shareholders’ interests. It is also the view of the Board of Directors that the ability of the Board of Directors to issue a new class or classes of shares, including preference shares, should not discourage anyone from proposing a merger or other transaction at a price reflective of the true value of the Company and which is in the interests of its shareholders.