Grand Court rules on contested shareholder meeting and dissident proxy disclosures
8 July, 2026
The Grand Court of the Cayman Islands has delivered an important judgment in MILFAM LLC v Morrow, Smith and Scully Royalty Ltd, addressing fundamental questions concerning shareholder meetings, the interpretation of articles of association, and disclosure obligations in contested director elections. The judgment, delivered by the Honourable Justice Segal after an expedited three-day trial, is likely to become an important Cayman authority on the conduct of shareholder activism and proxy contests. Broadhurst LLC acted for the successful First and Second Defendants.
The dispute arose from an attempt by MILFAM LLC (“MILFAM”), a substantial shareholder of Scully Royalty Ltd (“Scully”), a Cayman exempted company listed on the New York Stock Exchange, to replace the incumbent board at Scully’s AGM scheduled for 27 December 2025. MILFAM nominated five directors for election and circulated a dissident proxy statement seeking shareholder support. The incumbent directors purported to postpone the AGM following earlier litigation concerning the validity of MILFAM’s nomination notice. However, MILFAM contended that the postponement was ineffective, and proceeded to hold the AGM in Hong Kong, purportedly appointing its own chairman, and passing resolutions electing its nominees.
MILFAM then commenced proceedings seeking declarations, inter alia, that (1) the purported postponement of the AGM was invalid; (2) the AGM was validly held; and (3) the resolutions purporting to appoint MILFAM’s nominated slate of directors were valid.
Court’s Ruling
Although the Court held that the incumbent directors did not have power under Scully’s Articles of Association to postpone the AGM, the First and Second Defendants succeeded on the critical issues concerning the purported appointment of a chairman and MILFAM’s material disclosures failures. Justice Segal held that Scully’s Articles of Association did not contain an implied term allowing shareholders or proxies present at the AGM to appoint a chairman of the meeting where no director was present. As no chairman was validly appointed, the AGM could not conduct business, and the resolutions purporting to elect MILFAM’s nominees were invalid. The Court also made important observations on directors’ duties, where directors hold the exclusive power to appoint a chairman for shareholder meetings. In such circumstances, directors are under fiduciary duties to exercise that power appropriately. Otherwise, shareholders may be able to seek relief (including a mandatory injunction) requiring directors to appoint a chairman at a shareholder meeting.
Importance of Judgment
The judgment is important for Cayman corporate practice in three respects.
First, it confirms that the power to postpone a duly convened shareholder meeting must be found in the company’s constitutional documents. General board management powers and references to “postponement” in other provisions of the articles of association may not be enough.
Secondly, the Court took a strict approach to implying terms into articles of association. The absence of an express fallback mechanism for appointing a meeting chairman did not justify implying a shareholder power to do so.
Thirdly, the judgment provides significant guidance on disclosure obligations in dissident proxy contests. The Court held that, even if the AGM had been validly constituted, MILFAM’s nomination notice and proxy statement failed to disclose material matters concerning its relationships with two nominees. Those omissions could have affected shareholder voting decisions, and the relevant resolutions would have been invalid on that alternative basis.
The decision provides clear guidance that shareholder activism in Cayman companies must be conducted strictly according to a company’s constitutional documents and common law, requiring full, fair and materially complete disclosure to shareholders.
Broadhurst LLC’s team was led by Kyle Broadhurst and Adam Crane, who instructed James Potts KC of Erskine Chambers as leading counsel.
Broadhurst LLC advises clients on all aspects of corporate and shareholder disputes. For further information or to discuss how we can assist, please contact us at info@broadhurstllc.com.