Claim No. CFI 010/2017
THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS
IN THE COURT OF FIRST INSTANCE
IN THE MATTER OF ABN AMRO BANK N.V.
AND IN THE MATTER OF THE REGULATORY LAW (DIFC LAW NO. 1 OF 2004)
RULING OF JUSTICE SIR RICHARD FIELD HANDED DOWN ON 10 APRIL 2017
1.In these proceedings, ABN Amro Bank N.V. applies to the Court for approval of the transfer of part of its global private banking business under a Sale and Purchase Agreement dated 6 December 2016 to LGT Bank (Singapore) Ltd. I shall call the Applicant the “Transferor” and LGT Bank (Singapore) Ltd the “Transferee”.
2. The Transferor’s application is made under Articles 106 and 108 of the DIFC Regulatory Law which require an order of the Court sanctioning a scheme of transfer before the transfer can be effective. By Article 108(3) the Court may sanction the transfer scheme if it considers that in all the circumstances of the case it is appropriate to do so.
3. Under Article 111 of the Regulatory Law, an application for an order sanctioning a transfer scheme must be accompanied by a report on the scheme’s terms and the report must be made by a person who appears to the DFSA to have the skills necessary to make a proper report and who is nominated or approved for the purpose by the DFSA. The scheme report put before the Court is a report made by Clifford Chance LLP (“Clifford Chance”). Clifford Chance acted for the Transferor on the sale of the business to be transferred to the Transferee. At an earlier Directions Hearing, the Court ruled that so long as the report was produced by individuals who had not been involved in the Sale and Purchase Agreement, the fact that Clifford Chance had acted on that agreement did not disbar the firm from authoring the scheme report and the DFSA have approved Clifford Chance for the purpose of making the report.
4. By Article 111(5) of the Regulatory Law, the firm reporting on the scheme must give written notice of the proposed transfer to all interested parties and must advise of the proposed transfer by way of a notice published in an appointed newspaper. As to this requirement, Mr Grant McIntyre, Country Head of Legal for the DIFC branch of the Transferor, has confirmed in a witness statement that notices of the scheme of transfer were given to the Transferor’s clients and to the clients to be transferred under the scheme and to “interested parties”. In addition, notices in English and Arabic of the transfer were published in the Khaleej Times and the Gulf News newspapers and notices in English were published in the American, English, European and Asian editions of the Financial Times.
5. In response to the notice in the Financial Times, a Mr Lechner sent an email to the Transferor requesting the name and contact information of the manager in charge of the transfer. The requested details were provided by the Transferor but Mr Lechner responded saying that in light of the “refusal to answer properly” he wanted to object to the transfer. In reply, the Transferor informed Mr Lechner that if he wanted to object he could inform Clifford Chance and he was given the date and time of this sanction hearing. In the event, Mr Lechner has not taken any further steps to object nor has he appeared before the Court this morning, and given that there is no mention of Mr Lechner in the Transferor’s books and records, I see no reason why Mr Lechner’s intervention should afford any reason for not sanctioning the scheme.
6. The Court had been provided with a very detailed scheme of transfer, together with witness statements made by Ms Lee Teck Hoon, who is the Chief Financial Officer of the Transferee, and Mr Dominique Joye, the Transferor’s Chief Executive Officer. Article 112 of the Regulatory Law provides that before making an order for the transfer of a financial services business, the Court must be satisfied that the Transferee will have the authorization required to enable the business to be transferred to be carried on in the place in which it is to be transferred and the Transferee will possess adequate financial resources to carry on the business concerned in accordance with the legislation applicable in the place where the business will be transferred.
7. Ms Lee testifies that the transferee is approved by the Monetary Authority of Singapore (“MAS”) to operate as a merchant bank and states that the MAS imposes a minimum financial requirement on regulated financial services providers. She exhibits a report by PwC on the Transferee’s computation of the projected minimum additional share capital required by the Transferee to ensure that after the transfer it would be able to meet the related applicable capital requirement under Singapore’s financial resources requirement. The computation was done on the basis of an unaudited balance sheet of the Transferee as at 31 December 2016 together with the Transferor’s Funding Gap Statements representing the transferring clients’ assets and liabilities.
8. The balance sheet assumed that the proposed transfer had proceeded and the transferring business had been acquired. The resulting additional capital requirement to ensure meeting the financial resources requirement was computed to be approximately SGD
643 463 million. The drawing up of the balance sheet and the computation of the additional share capital requirement to meet the financial resources requirement was undertaken by Ms Lee the Transferee who testifies that the procedures adopted to compute the additional capital required were in accordance with the Singapore Standard on Related Services 4400 – Engagement to Perform Agreed-Upon Services Regarding Financial Information.
9. On 10 March 2017, the direct shareholder of the Transferee contributed SGD 750 million capital into the company. The review carried out by PwC did not amount to an audit or a review made in accordance with Singapore Standards and PwC does not express any assurance on the computation of the minimum additional capital and the actual injected capital. However, I am fully satisfied that the Transferee has adopted an appropriate methodology in computing the minimum additional capital and that the risk that the unaudited balance sheet as of 31 December 2016 and the Funding Gap Statements provided by the Transferor are materially inaccurate is vanishingly small.
10. I am therefore satisfied that the Transferee will have adequate financial resources to carry on the transferred business in accordance with the Singapore regulatory legislation.
11. Mr Joye sets out in detail in his witness statement the licensing and regulatory status of the Transferee and the extensive registrations filed on its behalf and the exemptions to which it is entitled. In addition, he exhibits a detailed legal opinion from Baker & McKenzie that concludes that the Transferee has authorisation under Singapore laws and regulations to conduct the transfer of the business, save that the Transferee is restricted from accepting SGD deposits or offering SGD overdraft facilities, although it may accept deposits in accordance with Asian Currency Unit guidelines. The Court has been informed this morning that none of the client accounts to be transferred involve deposits or overdrafts stated in SGD.
12. On the basis of Mr Joye’s witness statement and the information provided to the Court this morning, I am satisfied that the Transferee has the authorisation required to enable the business to be transferred to be carried on in Singapore.
13. Part of the business to be transferred will not be carried on in Singapore, but will be carried on in the DIFC. Most of the relationship mangers will be moved over to
the Transferee LGT (Middle East) Limited and that business will be conducted in accordance with DIFC regulations. The scheme report authored by Clifford Chance concludes after a careful and detailed analysis that there are no material adverse implications for clients arising out of the transfer. Mr Abbott has also emphasised the fact that the only alternative to the transfer of this business would be its winding up in the DIFC, which as he pointed out would not be in the interest of the Transferor’s clients.
14. Under the order the Court is asked to make, the business to be transferred (“the Transferring Business”) is transferred to the Transferee on the terms of the scheme. The order also lists six matters that shall not result from the transfer, including the invalidation or discharge of any contract or security or allowing any party to a contract to which the Transferor is a party to terminate the contract or vary its terms when that party would not otherwise be able to terminate or vary it. The scheme is to have effect on or with effect from the “Effective Time”, namely 00 hours, 30 April 2017.
15. The proposed order also provides that counterparty and third party rights available against the Transferor shall be exercisable against the Transferee and for the continuation of judicial, quasi-judicial, regulatory, administrative or arbitration proceedings with the Transferee substituted for the Transferor.
16. Under paragraph 7, books and other documents that would before the order have been evidence in respect of any matter for or against the Transferor at the Effective Time becomes admissible evidence against the Transferee after the Effective Time.
17. Under paragraph 9, personal data comprised in the Transferring Business of which the Transferor was the data controller immediately before the Effective Time becomes after the Effective Time data of which the Transferee shall be the controller.
18. Finally, paragraph 10 orders that the identities of the Transferor’s counterparties to the Third Party Agreements listed in Schedule 4 shall be treated as confidential and a list identifying the counterparties shall held under seal by the Court Registry. The final list of clients subject to the transfer cannot be settled until just before the Effective Time of 30 April 2017. However, the order provides for liberty to apply, thereby allowing the Transferor to apply for any necessary adjustment before the Effective Time.
19. The DFSA, as it was entitled to, has attended the hearing this morning. It has not advanced any submissions but on the other hand it has made it clear that it has no objection to the court sanctioning the transfer. Its comments on the scheme, the scheme report and the proposed order have been accommodated in those documents by the parties to the transfer. The Court was reassured to hear Mr Lake declare that there has been very close cooperation between the parties to the transfer and the DFSA.
20. Having reviewed the scheme, the scheme report, the witness statements and the proposed order, and upon being satisfied as previously stated as to the matters specified in Article 112 of the Regulatory Law, the Court will sanction the proposed transfer of the Transferring Business and will issue an order in the terms of the draft order before the Court.
Nassir Al Nasser
Date of issue: 10 April 2017
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