The High Court has ordered Best Christmas Trees Limited (BCTL) to buy Banfi Limited’s 16,525 shares in Emerald Group Holdings Limited (EGHL) for €20 a share, a total of €330,500. The court said it would hear counsel before setting the time for payment and transfer.
In a judgment delivered on 8 October 2009, Ms Justice Finlay Geoghegan found that EGHL’s affairs had been conducted oppressively towards Banfi, which held about 19.5% of its shares. The case was brought under section 205 of the Companies Act 1963.
The dispute concerned a restructuring in 2002, when BCTL became the holding company of the Emerald Group and took on plantation interests. The group had developed a Christmas tree business, but Banfi was not offered an opportunity to exchange its EGHL shares for shares in BCTL. The judge found that the decisions to use BCTL as the new company, make it the group’s holding company and leave Banfi out of the share exchange were made by Noel Moran and Karina Ray as EGHL directors.
The judge accepted that the bank required additional funding to go to a new company without historic liabilities and with assets to support borrowing. But she found the bank had not selected BCTL, required it to become the group’s holding company or specified who should own it. She found the restructuring was undertaken bona fide to preserve the group and its Christmas tree business, while also finding that the chosen structure disregarded Banfi’s interests.
The exclusion continued, the judge found, as the former businesses and plantation interests of EGHL were carried on through BCTL, leaving Banfi outside the group’s improved financial position and plantation profits. The court also pointed to decisions in 2005: EGHL’s historical liabilities to loan note holders and preference shareholders were not addressed, while a €256,000 debt owed by EGHL to BCTL was written off by BCTL but remained a liability of EGHL.
A separate allegation that Moran and Ray had fraudulently procured Banfi’s 1999 transfer of 8,800 EGHL shares was not made out. The court therefore based relief on Banfi’s 19.5% holding, not a larger shareholding.
The judge chose a cash buyout because issuing Banfi shares in BCTL was not in the parties’ interests given the breakdown in their relationship. In valuing BCTL, she allowed about €1.25 million for planted trees and accounted for a probable liability of about €250,000 to investor Charlie Kenny, while noting substantial uncertainty in the valuation evidence. The resulting estimated company value was about €2.064 million. The court then set the buyout price at €20 per EGHL share, or €330,500 in total.