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| Michael McGavick Chief Executive Officer |
| | Eugene McQuade Chairman of the Board of Directors |
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| | | | | A-1 | |
| | | | | B-1 | |
| | | | | C-5 | |
| | | | | D-1 | |
| | | | | E-1 | |
| | | | | F-1 | |
| | | | | G-1 |
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Three Months Ended March 31,
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Year Ended December 31,
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2016
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2015
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2015
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2014
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2013
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2012
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2011
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(U.S. dollars in thousands)
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Income Statement Data | | | | | | | | | |||||||||||||||||||||||||||||||||||
Net premiums earned
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| | | $ | 2,354,610 | | | | | $ | 1,334,000 | | | | | $ | 8,226,425 | | | | | $ | 5,895,070 | | | | | $ | 6,309,521 | | | | | $ | 6,090,437 | | | | | $ | 5,690,130 | | |
Net investment income
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| | | | 205,886 | | | | | | 208,513 | | | | | | 872,370 | | | | | | 918,625 | | | | | | 957,716 | | | | | | 1,012,348 | | | | | | 1,137,769 | | |
Net realized (losses) gains on investments and unrealized gains (losses) on investments, trading
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| | | | 92,750 | | | | | | 52,891 | | | | | | 19,997 | | | | | | 122,991 | | | | | | 87,777 | | | | | | 14,098 | | | | | | (188,359) | | |
Net realized and unrealized (losses) gains on derivative instruments
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| | | | (3,622) | | | | | | 16,521 | | | | | | 53,123 | | | | | | 29,886 | | | | | | 7,798 | | | | | | 5,221 | | | | | | (10,738) | | |
Fee income and other
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| | | | 8,262 | | | | | | 4,728 | | | | | | 33,201 | | | | | | 43,630 | | | | | | 40,031 | | | | | | 51,789 | | | | | | 41,748 | | |
Net losses and loss expenses incurred
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| | | | 1,382,485 | | | | | | 769,827 | | | | | | 4,766,200 | | | | | | 3,258,393 | | | | | | 3,731,464 | | | | | | 3,765,482 | | | | | | 4,078,391 | | |
Claims and policy benefits – life operations
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| | | | 4,937 | | | | | | 19,387 | | | | | | 115,997 | | | | | | 242,963 | | | | | | 465,702 | | | | | | 486,195 | | | | | | 535,074 | | |
Acquisition costs, operating expenses
and foreign exchange gains and losses |
| | | | 884,829 | | | | | | 506,742 | | | | | | 3,306,891 | | | | | | 2,041,865 | | | | | | 2,094,258 | | | | | | 2,097,992 | | | | | | 1,869,688 | | |
Interest expense
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| | | | 52,303 | | | | | | 51,438 | | | | | | 205,215 | | | | | | 134,106 | | | | | | 155,462 | | | | | | 172,204 | | | | | | 205,592 | | |
Extinguishment of debt
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| | | | — | | | | | | — | | | | | | 5,592 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Impairment of goodwill
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| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 429,020 | | |
(Loss) income before non-controlling interests, net income from operating affiliates and income tax expense
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| | | | 92,673 | | | | | | 75,221 | | | | | | 909,031 | | | | | | 258,517 | | | | | | 1,094,348 | | | | | | 710,524 | | | | | | (420,962) | | |
(Loss) income from operating
affiliates |
| | | | 12,650 | | | | | | 22,668 | | | | | | 44,740 | | | | | | 107,218 | | | | | | 119,804 | | | | | | 53,887 | | | | | | 76,786 | | |
Preference share dividends(1)
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| | | | | | | | | | | | | | | | 98,721 | | | | | | 76,743 | | | | | | 77,187 | | | | | | 79,087 | | | | | | 72,278 | | |
Gain on redemption of Series C Preference Ordinary Shares
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| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net (loss) income available to shareholders
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| | | $ | 21,885 | | | | | $ | 36,281 | | | | | $ | 1,207,152 | | | | | $ | 188,340 | | | | | $ | 1,059,916 | | | | | $ | 651,128 | | | | | $ | (474,760) | | |
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Three Months
Ended March 31, |
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Year Ended December 31,
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2016
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2015
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2015
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2014
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2013
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2012
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2011
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Other Financial Data | | | | | | | | | |||||||||||||||||||||||||||||||||||
Earnings (loss) per ordinary share: | | | | | | | | | |||||||||||||||||||||||||||||||||||
Basic
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| | | $ | 0.07 | | | | | $ | 0.14 | | | | | $ | 4.22 | | | | | $ | 0.71 | | | | | $ | 3.68 | | | | | $ | 2.12 | | | | | $ | (1.52) | | |
Diluted
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| | | $ | 0.07 | | | | | $ | 0.14 | | | | | $ | 4.15 | | | | | $ | 0.69 | | | | | $ | 3.63 | | | | | $ | 2.10 | | | | | $ | (1.52) | | |
Cash dividends per ordinary share
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| | | $ | 0.20 | | | | | $ | 0.16 | | | | | $ | 0.72 | | | | | $ | 0.64 | | | | | $ | 0.56 | | | | | $ | 0.44 | | | | | $ | 0.44 | | |
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As of March 31,
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As of December 31,
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2016
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2015
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2015
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2014
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2013
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2012
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2011
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(U.S. dollars in thousands, except per ordinary share amounts)
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Balance Sheet Data | | | | | | | | | |||||||||||||||||||||||||||||||||||
Total investments available
for sale |
| | | $ | 33,843,284 | | | | | $ | 30,062,733 | | | | | $ | 33,753,898 | | | | | $ | 30,484,053 | | | | | $ | 28,996,661 | | | | | $ | 28,818,982 | | | | | $ | 27,017,285 | | |
Cash and cash equivalents
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| | | | 2,820,897 | | | | | | 3,209,934 | | | | | | 3,256,236 | | | | | | 2,521,814 | | | | | | 1,800,832 | | | | | | 2,618,378 | | | | | | 3,825,125 | | |
Restricted cash
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| | | | 161,019 | | | | | | — | | | | | | 154,992 | | | | | | — | | | | | | — | | | | | | — | | | | |||||
Investments in affiliates
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| | | | 1,953,711 | | | | | | 1,655,394 | | | | | | 1,708,899 | | | | | | 1,637,620 | | | | | | 1,370,943 | | | | | | 1,126,875 | | | | | | 1,052,729 | | |
Unpaid losses and loss expenses recoverable
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| | | | 5,374,604 | | | | | | 3,529,331 | | | | | | 5,262,706 | | | | | | 3,429,368 | | | | | | 3,435,230 | | | | | | 3,382,102 | | | | | | 3,654,948 | | |
Premiums receivable
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| | | | 6,041,000 | | | | | | 2,898,739 | | | | | | 4,712,493 | | | | | | 2,473,736 | | | | | | 2,612,602 | | | | | | 2,568,862 | | | | | | 2,411,611 | | |
Total assets
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| | | | 60,645,692 | | | | | | 46,080,556 | | | | | | 58,682,938 | | | | | | 45,046,819 | | | | | | 45,652,887 | | | | | | 45,386,895 | | | | | | 44,665,265 | | |
Unpaid losses and loss expenses
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| | | | 25,913,484 | | | | | | 18,965,264 | | | | | | 25,439,744 | | | | | | 19,353,243 | | | | | | 20,481,065 | | | | | | 20,484,121 | | | | | | 20,613,901 | | |
Future policy benefit reserves
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| | | | 4,020,602 | | | | | | 4,375,863 | | | | | | 4,163,500 | | | | | | 4,707,199 | | | | | | 4,803,816 | | | | | | 4,812,046 | | | | | | 4,845,394 | | |
Unearned premiums
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| | | | 8,217,539 | | | | | | 4,532,022 | | | | | | 7,043,358 | | | | | | 3,973,132 | | | | | | 3,846,526 | | | | | | 3,755,086 | | | | | | 3,555,310 | | |
Notes payable and debt
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| | | | 2,653,895 | | | | | | 2,643,561 | | | | | | 2,644,970 | | | | | | 1,662,580 | | | | | | 2,263,203 | | | | | | 1,672,778 | | | | | | 2,275,327 | | |
Shareholders’ equity
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| | | | 13,667,718 | | | | | | 11,646,423 | | | | | | 13,654,463 | | | | | | 11,435,766 | | | | | | 11,349,298 | | | | | | 11,856,403 | | | | | | 10,756,130 | | |
Fully diluted tangible book value per ordinary share(2)
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| | | | 32.62 | | | | | | 37.60 | | | | | | 31.52 | | | | | | 36.79 | | | | | | 33.86 | | | | | | 33.35 | | | | | | 28.31 | | |
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Three Months
Ended March 31, |
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Year Ended December 31,
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2016
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2015
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2015
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2014
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2013
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2012
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2011
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Operating Ratios | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||
Loss and loss expense ratio(3)
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| | | | 58.8% | | | | | | 58.3% | | | | | | 58.4% | | | | | | 57.0% | | | | | | 62.0% | | | | | | 65.3% | | | | | | 76.6% | | |
Underwriting expense ratio(4)
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| | | | 33.7% | | | | | | 30.6% | | | | | | 33.6% | | | | | | 31.2% | | | | | | 30.5% | | | | | | 31.0% | | | | | | 30.9% | | |
Combined ratio(5)
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| | | | 92.5% | | | | | | 88.9% | | | | | | 92.0% | | | | | | 88.2% | | | | | | 92.5% | | | | | | 96.3% | | | | | | 107.5% | | |
Provision
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XL-Ireland
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XL-Bermuda
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Capital Structure | | | | ||||
Authorized Share Capital
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| | The authorized share capital of XL-Ireland is €40,000 divided into 40,000 subscriber shares with nominal value of €1 per share (which we refer to in this proxy statement as the “subscriber shares”) and US$9,999,900, divided into 500,000,000 ordinary shares with nominal of with US$0.01 per share (which we refer to in this proxy statement as the “XL-Ireland ordinary shares”), and 499,990,000 undesignated shares with nominal value of US$0.01 per share (which we refer to in this proxy statement as the “undesignated shares”). | | | The authorized share capital of XL-Bermuda is US$100 divided into 10,000 shares of par value US$0.01 each. The authorized share capital of XL-Bermuda as of immediately prior to the Transaction will be US$9,999,900 divided into 500,000,000 common shares of par value US$0.01 each and 499,990,000 shares of par value US$0.01 each. | |
Voting
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| | Except as otherwise specified below, references to voting by shareholders of XL-Ireland are references to voting by holders of shares entitled to attend and vote generally at general meetings of the shareholders of XL-Ireland. The only such shares of XL-Ireland issued and outstanding are the XL-Ireland ordinary shares. | | |
Except as otherwise specified below, references to voting by shareholders of XL-Bermuda are references to voting by holders of shares entitled to attend and vote generally at general meetings of the shareholders of XL-Bermuda. Note that shareholders of Bermuda companies are also referred to as “members”, and we use both terms interchangeably. Immediately after the Effective Time, the only such
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Provision
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XL-Ireland
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XL-Bermuda
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shares of XL-Bermuda issued and outstanding will be the XL-Bermuda common shares issued pursuant to the Scheme of Arrangement.
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Increases in Authorized Share Capital
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| | XL-Ireland has the authority, pursuant to its articles of association, to increase its authorized but unissued share capital by ordinary resolution by creating additional XL-Ireland shares of any class or series. An “ordinary resolution” of XL-Ireland requires more than 50% of the votes cast at a shareholders’ meeting by shareholders entitled to vote at that meeting. | | | XL-Bermuda has the authority, pursuant to its bye-laws, to increase its authorized but unissued share capital by resolution of the XL-Bermuda shareholders by creating additional XL-Bermuda shares of any class or series. XL-Bermuda’s bye-laws provide that a resolution for these purposes requires more than 50% of the votes cast at a shareholders’ meeting by shareholders entitled to vote at that meeting. | |
Issuance of Shares
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As a matter of Irish law, the board of directors of a company may issue authorized but unissued new shares without shareholder approval once authorized to do so by the articles of association of the company or by an ordinary resolution adopted by the shareholders at a general meeting. The authority conferred can be granted for a maximum period of five years, at which point it must be renewed by the shareholders by an ordinary resolution.
Because of this requirement of Irish law, at the 2015 annual general meeting the shareholders approved an ordinary resolution to authorize the Board of Directors of XL-Ireland to issue new shares up to an aggregate nominal amount of $846,880 (84,867,999) shares being the equivalent to approximately 33% of the aggregate nominal value of the issued ordinary share capital of XL-Ireland as of March 17, 2015 and this authority expires 18 months from the 2015 annual general meeting.
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| | As a matter of Bermuda law, the board of directors of a company may issue authorized but unissued new shares without shareholder approval once authorized to do so by the bye-laws of the company. There is no time limit under Bermuda law restricting how long this authority may be granted for. | |
Undesignated Shares
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| | XL-Ireland’s articles of association authorize its Board of Directors, without shareholder approval, to determine the terms of the undesignated shares issued by XL-Ireland. The XL-Ireland Board of Directors is authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of that class or series of | | | XL-Bermuda’s bye-laws authorize the XL-Bermuda Board, without shareholder approval, but subject to the provisions of XL-Bermuda’s bye-laws, the limitations prescribed by law and without prejudice to any special rights previously conferred on holders of any existing class or series of shares of XL-Bermuda, to issue, allot, exchange or otherwise dispose of shares or options, warrants or other rights to | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | shares, to provide from time to time for the issuance of ordinary shares or other classes or series of shares and to establish the characteristics of each such other class or series, including the number of shares and their preferred or deferred or other special rights and privileges or limitations, conditions and restrictions, whether in regard to dividends, voting, return of capital, conversion, redemption or otherwise. | | |
purchase shares or securities which are convertible into or exchangeable for shares, at such time, for such consideration and on such terms and conditions as the XL-Bermuda Board may determine.
The XL-Bermuda Board is authorised, pursuant to XL-Bermuda’s bye-laws and without shareholder approval, but subject to the provisions of XL-Bermuda’s bye-laws, the limitations prescribed by law and without prejudice to any special rights previously conferred on the holders of any existing class or series of shares, to issue and allot non-voting common shares that do not entitle the holders thereof to voting rights.
XL-Bermuda’s bye-laws authorize the XL-Bermuda Board, without shareholder approval, but subject to the provisions of XL-Bermuda’s bye-laws, the limitations prescribed by law and without prejudice to any special rights previously conferred on the holders of any existing class or series of shares, to issue shares in one or more series and if it does so, may name and designate each series in such manner as it deems appropriate to reflect the particular rights and restrictions attached to that series.
Each such share will have attached to it such preferred, qualified or other special rights, privileges and conditions and be subject to such restrictions, whether in regard to dividend, return of capital, redemption, conversion into the XL-Bermuda common shares or voting or otherwise, as the XL-Bermuda Board may determine on or before its allotment.
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Fractional Shares
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| | Irish law does not recognize fractional shares held of record. Accordingly, XL-Ireland’s articles of association do not provide for the issuance of fractional XL-Ireland shares and the official register of XL-Ireland does not reflect any fractional shares. Whenever as a result of an alteration or reorganization of the share capital of XL-Ireland any shareholder would become entitled to fractions of a share, the Board of | | | Bermuda law recognizes fractional shares. Accordingly, the XL-Bermuda bye-laws authorize XL-Bermuda to issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | Directors may, on behalf of those shareholders, sell the shares representing the fractions and distribute the proceeds of sale among those shareholders (or, if those proceeds are less than an amount fixed by the Board of Directors, retain them for the benefit of the company). This ability of the Board of Directors of XL-Ireland to dispose of fractional shares is required in order to comply with the Irish law prohibition on fractional shares held of record. | | | | |
Issued Share Capital
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| | The issued share capital of XL-Ireland at Close of Business on May 10, 2016 is $2,833,685.33, consisting of 283,368,533 ordinary shares, with nominal value of US$0.01 per share. | | |
Immediately prior to the Transaction, the issued share capital of XL-Bermuda will be US$0.01 divided into one (1) XL-Bermuda common share of par value US$0.01 per XL-Bermuda common share, which share will be held by XL-Ireland.
At the Effective Time, the XL-Bermuda common share held by XL-Ireland will be purchased at nominal value by XL-Bermuda, and thereby treated as cancelled, in accordance with Section 42A of the Bermuda Companies Act. Also at the Effective Time, XL-Bermuda will issue a number of its common shares that is equal to the number of XL-Ireland ordinary shares outstanding prior to the Transaction.
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Reduction of Share Capital
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| | XL-Ireland may, by ordinary resolution, reduce its authorized but unissued share capital. XL-Ireland also may, by special resolution and subject to confirmation by the Irish High Court, reduce or cancel its issued share capital, any share premium account, any undenominated capital account or capital redemption reserve fund. A special resolution requires not less than 75% of the votes cast by XL-Ireland shareholders at a meeting of shareholders. | | | XL-Bermuda may, by resolution of the XL-Bermuda shareholders and by publishing the intent to reduce its capital in a local newspaper, reduce its authorized but unissued share capital, or its issued share capital, in any way and on such terms as it sees fit, pursuant to the Bermuda Companies Act. Under the Bermuda Companies Act, a Bermuda company may agree in its bye-laws that no shareholder approval of such share capital reduction is required. However, for these purposes, XL-Bermuda’s bye-laws require more than 50% of the votes cast by XL-Bermuda shareholders at a meeting of shareholders to pass the resolution, provided a reduction of issued share capital shall require the affirmative vote of 75% of votes cast by members present or represented by proxy and voting at such general meeting. Where any such | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | | | | share capital reduction is carried out, XL-Bermuda must file a memorandum of reduction of share capital with the Bermuda Registrar of Companies. | |
Pre-emption Rights, Share Warrants and Share Options
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Under Irish law, certain statutory pre-emption rights apply automatically in favor of XL-Ireland ordinary shareholders when XL-Ireland shares are issued for cash. However, XL-Ireland opted out of these pre-emption rights in its articles of association as permitted under Irish law. Irish law requires this opt-out to be renewed at least every five years by a special resolution of the shareholders.
If the opt-out expires and is not renewed, shares issued for cash must be offered to pre-existing ordinary shareholders of XL-Ireland pro rata to their existing shareholding before the shares can be issued to any new shareholders or pre-existing shareholders in an amount greater than their pro rata entitlements. The statutory pre-emption rights:
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generally do not apply where shares are issued for non-cash consideration;
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do not apply to the issuance of non-equity shares (that is, shares that have the right to participate only up to a specified amount in any dividend and capital distribution, which are sometimes referred to as non-participating shares); and
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do not apply to the issuance of shares pursuant to certain employee compensation plans (the XL 1991 Performance Incentive Program and the XL Directors’ Stock and Option Plan both permit grants to non-employee directors, and while shares issuable to employees under these plans should be exempted, allotments to non-employee directors do not fit within this exception).
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| | Under Bermuda law, there are no statutory pre-emption rights and therefore, no shareholder of a Bermuda company has an automatic pre-emptive right to subscribe for additional issuances of a company’s shares unless, and to the extent that, such right is attached to a class of shares on issue or is otherwise expressly granted to the shareholder under the bye-laws of such company or under any contract between the shareholder and the company. XL-Bermuda’s bye-laws do not grant pre-emptive rights to shareholders. | |
Provision
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XL-Ireland
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XL-Bermuda
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The Irish Companies Act 2014 provides that directors may issue share warrants or options without shareholder approval once authorized to do so by the articles of association or an ordinary resolution of shareholders. This authority can be granted for a maximum period of five years, after which it must be renewed by the shareholders by an ordinary resolution.
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| | | The articles of association of XL-Ireland provide that the Board of Directors of XL-Ireland is authorized to grant, upon such terms as the Board of Directors deems advisable, options to purchase (or commitments to issue at a future date) XL-Ireland shares of any class or series, and to cause warrants or other appropriate instruments evidencing such options or commitments to be issued. This authority under the articles was renewed at the 2015 annual general meeting and will lapse after 18 months from the date of the 2015 annual general meeting. Under the same 2015 shareholder authority, the Board of Directors may issue shares upon exercise of warrants or options or other commitments without further shareholder approval or authorization up to $846,880 (84,867,999) shares being equivalent to approximately 33% of the aggregate nominal value of the issued ordinary share capital of XL-Ireland as of March 17, 2015 and this authority expires 18 months from the 2015 annual general meeting. Statutory pre-emption rights will apply to the issuance of warrants and options issued by XL-Ireland unless an opt-out applies or shareholder approval for an opt-out is obtained in the same manner described directly above for XL-Ireland ordinary shares. | | |
The Bermuda Companies Act provides that a Bermuda company may regulate in its bye-laws, among other things, the allotment and issue of warrants or options without shareholder approval once authorized to do so by the company’s bye-laws. There is no time limit under Bermuda law restricting how long this authority may be granted for.
XL-Bermuda’s bye-laws provide that the XL-Bermuda Board is authorized to issue share warrants and share options by a resolution of the XL-Bermuda Board and such share warrants and share options will be contractual obligations of XL-Bermuda.
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| | | XL-Ireland is subject to the rules of the NYSE requiring shareholder approval of certain share issuances. The Irish Takeover Rules may be applicable in certain circumstances and can impact | | | XL-Bermuda will be subject to the rules of the NYSE requiring shareholder approval of certain share issuances. There is no takeover code in Bermuda equivalent to the Irish Takeover Rules. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | XL-Ireland’s ability to issue shares. Please see “Risk Factors.” | | | | |
Dividends and Distributions
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Under Irish law, dividends and distributions may only be made from distributable reserves. Distributable reserves, broadly, means the accumulated realized profits of XL-Ireland less accumulated realized losses of XL-Ireland on a standalone basis. In addition, no dividend or distribution may be made unless the net assets of XL-Ireland are not less than the aggregate of XL-Ireland’s share capital plus undistributable reserves and the distribution does not reduce XL-Ireland’s net assets below such aggregate.
Undistributable reserves include the share premium account, the capital redemption reserve fund and the amount by which XL-Ireland’s accumulated unrealized profits, so far as not previously utilized by any capitalization, exceed XL-Ireland’s accumulated unrealized losses, so far as not previously written off in a reduction or reorganization of capital.
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| | Under Bermuda law, dividends may be made by the company out of its profits or other distributions may be made out of its contributed surplus (in each case, either in cash or in specie, including in shares of XL-Bermuda), to be paid to the shareholders in proportion to the number of shares held by them, and in accordance with their rights and interests, including such interim dividends as appear to the XL-Bermuda Board to be justified by the position of XL-Bermuda. For these purposes “contributed surplus” includes proceeds from donated shares, credits resulting from the redemption or conversion of shares at less than the amount set up as nominal capital and donations of cash and other assets to the company. | |
| | | The determination as to whether or not XL-Ireland has sufficient distributable reserves to fund a dividend must be made by reference to “relevant entity financial statements” of XL-Ireland. The “relevant entity financial statements” are either the last set of unconsolidated annual audited financial statements or unaudited financial statements prepared in accordance with the Irish Companies Act 2014, which give a “true and fair view” of XL-Ireland’s unconsolidated financial position in accordance with accepted accounting practice in Ireland. These “relevant entity financial statements” must be filed in the Companies Registration Office (the official public registry for companies in Ireland). | | | There is no requirement under Bermuda law to declare dividends, or declare distributions out of contributed surplus, by reference to any particular accounts or financial statements of XL-Bermuda. | |
| | | XL-Ireland’s articles of association authorize the Board of Directors of XL-Ireland to declare such dividends as | | |
XL-Bermuda’s bye-laws authorize the XL-Bermuda Board, in its discretion (but subject to any rights or restrictions at the
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Provision
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XL-Ireland
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XL-Bermuda
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appear justified from the profits of XL-Ireland without the approval of the shareholders. The dividends can be declared and paid in the form of cash or non-cash assets, subject to applicable law. XL-Ireland may pay dividends in any currency but intends to do so in U.S. dollars. The Board of Directors of XL-Ireland may deduct from any dividend or other moneys payable to any shareholder all sums of money, if any, due from the shareholder to XL-Ireland in respect of shares of the company.
The Board of Directors of XL-Ireland is also authorized to issue shares in the future with preferred rights to participate in dividends declared by XL-Ireland. The holders of such preference shares may, depending on their terms, rank senior to the holders of the ordinary shares of XL-Ireland with respect to dividends.
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time lawfully attached to any class or series of shares, and subject to XL-Bermuda’s bye-laws and the solvency requirements discussed below), to declare such dividends and determine that any dividend shall be paid in cash or wholly or partly in specie, in which case the XL-Bermuda Board may fix the value for distribution in specie of any assets. The XL-Bermuda Board may declare and pay dividends in any currency that the XL-Bermuda Board in its discretion shall choose.
XL-Bermuda’s bye-laws provide that no dividend or distribution payable by XL-Bermuda will bear interest against XL-Bermuda and the XL-Bermuda Board may deduct from any such dividend or distribution all sums of money (if any) presently payable by him or her to XL-Bermuda on account of calls or otherwise in respect of shares of XL-Bermuda. Any dividend, or distribution out of contributed surplus, unclaimed for a period of six years from the date of declaration of such dividend or distribution will be forfeited and will revert and belong to XL-Bermuda.
Under the Bermuda Companies Act, a company may not (i) declare a dividend; or (ii) make a distribution out of contributed surplus, if there are reasonable grounds for believing that: (x) the company is or would, after the payment, be unable to pay its liabilities as they become due; or (y) the realizable value of the company’s assets would thereby be less than its liabilities.
Under XL-Bermuda’s bye-laws, a majority of the XL-Bermuda Board may fix, in advance, a record date for determining the shareholders entitled to receive any dividend or distribution.
Before declaring any dividend or distribution, the XL-Bermuda Board may, from time to time, set aside out of the surplus or profits of XL-Bermuda, such amounts as it thinks proper as a reserve, to be used to meet contingencies or for equalizing dividends or for any other special or general purpose.
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Provision
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XL-Ireland
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XL-Bermuda
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| | | | | | There is no distinction between interim and final dividends in Bermuda as the declaration and payment of dividends is at the discretion of the XL-Bermuda Board. Once the XL-Bermuda Board declares and pays a dividend, only then will the XL-Bermuda Board be obliged to pay the dividend to XL-Bermuda common shareholders, subject to the solvency requirements discussed above and any other conditions set by the XL-Bermuda Board. Directors must also consider that the dividend declaration is in the interests of XL-Bermuda. |
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Share Repurchases, Redemptions and Conversions
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Repurchases and Redemptions by XL-Ireland
Under Irish law and subject to certain restrictions, a company can issue redeemable shares and redeem or repurchase them out of distributable reserves (which are described above under “—Dividends”) or the proceeds of a new issue of shares made for that purpose. The issue or redemption of redeemable shares may only be made by XL-Ireland where the nominal value of the issued share capital that is not redeemable is at least 10% of the nominal value of the total issued share capital of XL-Ireland. No share may be redeemed unless it is fully paid up and the terms of redemption of the shares must provide for payment on redemption. Subject to certain limitations imposed by Irish law, shareholder approval will not be required to redeem XL-Ireland shares.
XL-Ireland’s articles of association provide that any ordinary share of XL-Ireland will be automatically converted into a redeemable share at the time of the existence or creation of an agreement, transaction or trade pursuant to which XL-Ireland acquires or will acquire its ordinary shares or an interest in its ordinary shares from a person, unless the ordinary shares are listed on a market recognized for the purposes of the Irish Companies Act 2014 and the
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Repurchases and Redemptions by XL-Bermuda
Under Bermuda law and subject to certain restrictions, a company can issue redeemable shares and redeem them out of (i) the capital paid up on the redeeming shares; or (ii) out of the funds of the company which would otherwise be available for dividends or distributions; or (iii) out of the proceeds of a fresh issue of shares made for the purpose of the redemption. Under the Bermuda Companies Act, a company limited by shares may, if authorized to do so by its memorandum of association or bye-laws, purchase its own shares.
Under XL-Bermuda’s bye-laws, the XL-Bermuda Board may exercise all of the powers of XL-Bermuda to purchase or acquire all or any part of its own shares at any price and upon such terms as the XL-Bermuda Board may in its discretion determine, provided always that such acquisition is in accordance with the Bermuda Companies Act. Further XL-Bermuda may acquire its own shares as treasury shares in accordance with the Bermuda Companies Act and on such terms as the XL-Bermuda Board think fit. The Bermuda Companies Act prohibits XL-Bermuda from exercising the rights to attend and vote at a general meeting of XL-Bermuda that attach to any treasury shares acquired by XL-Bermuda.
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Provision
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XL-Ireland
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XL-Bermuda
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Board of Directors of XL-Ireland determines to treat the acquisition as a purchase.
Accordingly, for Irish law purposes, it is intended that the repurchase of XL-Ireland ordinary shares can technically be consummated as a redemption of those shares as described in the preceding paragraph. If the articles of association of XL-Ireland did not contain such provisions, repurchases by XL-Ireland would be subject to many of the same rules that apply to purchases of XL-Ireland ordinary shares by subsidiaries described below under “—Purchases by Subsidiaries of XL-Ireland,” including the shareholder approval requirements described below and the requirement that any on-market purchases be consummated on a market recognized for the purposes of the Irish Companies Act 2014. Except where otherwise noted, when we refer elsewhere in this proxy statement to repurchasing or buying back XL-Ireland shares, we are referring to the redemption of shares by XL-Ireland pursuant to such provision of the articles of association.
XL-Ireland’s articles of association also provide it with an additional general authority to purchase its own shares on-market that would take effect on substantially the same terms and be subject to substantially the same conditions applicable to purchases by XL-Ireland’s subsidiaries, as described below.
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| | XL-Bermuda must satisfy the solvency requirements under the Bermuda Companies Act if it is to purchase its shares and may not purchase its own shares if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that XL-Bermuda is, or after the purchase would be, unable to pay its liabilities as they become due. If Proposal Number Eleven is approved by shareholders, XL-Bermuda’s bye-laws will provide XL-Bermuda the option to purchase for fair market value all or part of the shares held by a XL-Bermuda shareholder if the XL-Bermuda Board in its sole discretion determines that ownership of shares of XL-Bermuda by such shareholders may result in adverse tax, regulatory or legal consequences to XL-Bermuda or its subsidiaries or any other shareholder to the extent the XL-Bermuda Board, in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences. |
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| | | The Board of Directors of XL-Ireland have the authority to issue preference or other classes or series of shares that may be redeemed at the option of either XL-Ireland or the holder, depending on the terms of such shares. Please see “—Capital Structure—Authorized Share Capital” above for additional information on preference shares. | | | The XL-Bermuda Board has the authority to issue preference or other classes or series of shares that may be redeemed at the option of either XL-Bermuda or the holder, depending on the terms of such shares. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | Repurchased and redeemed XL-Ireland shares may be cancelled or held as treasury shares. The nominal value of treasury shares held by XL-Ireland at any time must not exceed 10% of the nominal value of the company’s total issued share capital. While XL-Ireland holds shares as treasury shares, it cannot exercise any voting rights in respect of those shares and no dividend or other payment can be paid to XL-Ireland in respect of those shares. Treasury shares may be cancelled by XL-Ireland or re-issued subject to certain conditions. | | | Repurchased and redeemed XL-Bermuda common shares may be cancelled or held as treasury shares in accordance with the Bermuda Companies Act and on such terms as the XL-Bermuda Board thinks fit. | |
| | | Purchases by Subsidiaries of XL-Ireland | | | | |
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Under Irish law, it may be permissible for a subsidiary to purchase XL-Ireland shares either on-market or off-market. In order for a subsidiary of XL-Ireland to make an on-market purchase of XL-Ireland’s shares, such shares must be purchased on a market recognized for the purposes of the Irish Companies Act 2014 such as the NYSE on which the XL-Ireland ordinary shares are listed.
A general authority of the shareholders of XL-Ireland is required to allow a subsidiary of XL-Ireland to make on-market purchases of XL-Ireland shares; however, as long as this general authority has been granted, no specific shareholder authority is required for a particular on-market purchase. This general authority must expire no later than five years after the date it was granted.
For an off-market purchase of XL-Ireland shares, the proposed purchase contract must be authorized by special resolution of the shareholders of XL-Ireland before the contract is entered into. The person whose shares are to be purchased cannot vote in favor of the special resolution and, for at least 21 days prior to the special resolution, the purchase contract must be on display or must be available for inspection by shareholders at the registered office of XL-Ireland.
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Provision
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XL-Ireland
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XL-Bermuda
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| | | The number of XL-Ireland shares held by its subsidiaries at any time will count as treasury shares for the purposes of the permitted treasury share threshold of 10% of the nominal value of the issued share capital of XL-Ireland set by the Irish Companies Act 2014. While a subsidiary holds XL-Ireland shares, it cannot exercise any voting rights in respect of those shares. The acquisition of XL-Ireland shares by a subsidiary must be funded out of distributable reserves of the subsidiary. |
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Bonus Shares
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| | Under XL-Ireland’s articles of association, upon the recommendation of the Board of Directors of XL-Ireland, the shareholders by ordinary resolution may authorize the Board to capitalize any amount credited to any reserve (including the share premium account and the capital redemption reserve fund) or credited to the profit and loss account, and use such amount for the issuance to shareholders of shares as fully paid bonus shares on the same basis of entitlement as would apply in respect of a dividend distribution. | | | Under XL-Bermuda’s bye-laws, the XL-Bermuda Board may capitalize any part of the amount standing to the credit of (i) any of XL-Bermuda’s share premium or other reserve accounts or funds; or (ii) to the credit of the profit and loss account or otherwise available for distribution by applying such amount in paying up unissued shares to be allotted as fully paid bonus shares pro rata to XL-Bermuda’s shareholders. | |
Financial Assistance
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| | Under Irish law, there is a statutory prohibition on an Irish company giving financial assistance to another person for the purpose of the subscription or purchase of its own shares or the shares of its holding company. | | | Under Bermuda law, there is no statutory prohibition on a Bermuda company giving financial assistance to another person in order to purchase its own shares or the shares of its parent company. | |
Shareholder Approval of Business Combinations
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There are a number of mechanisms for acquiring an Irish public limited company, including:
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a court-approved scheme of arrangement under the Irish Companies Act 2014. A scheme of arrangement with one or more classes of shareholders requires a court order from the Irish High Court and the approval of: (1) more than 50% in number of the shareholders of each participating class or series voting on the scheme of arrangement, (2) representing
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There are a number of mechanisms for acquiring a Bermuda limited company, including:
Schemes of Arrangement:
Bermuda companies are able to apply to the Bermuda Court under Section 99 of the Bermuda Companies Act to obtain the Court’s sanction of a proposed scheme of arrangement. Schemes may be transfer schemes or cancellation schemes but, unlike a transfer scheme, a cancellation scheme requires the company to pass a solvency test or obtain the
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Provision
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XL-Ireland
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XL-Bermuda
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75% or more by value of the shares of such participating class or series held by the shareholders voting on the scheme of arrangement, in each case at the relevant meeting or meetings. A scheme of arrangement, if authorized by the shareholders of each participating class or series and the court, is binding on all of the shareholders of each participating class or series. Shares held by the acquiring party are not excluded from the tally of a vote on the scheme, but such shares may be considered to belong to a separate class for the purposes of approving the scheme, in which case the acquiring party’s shares would not be voted for purposes of the separate class approval required from the remaining, non-acquiring shareholders;
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through a tender offer by a third party. Where the holders of 80% or more in value of a class of XL-Ireland’s shares (excluding any shares already beneficially owned by the offeror) have accepted an offer for their shares in XL-Ireland, the remaining shareholders in that class may be statutorily required to also transfer their shares, unless, within one month, the non-tendering shareholders can obtain an Irish court order otherwise providing. If the offeror has acquired acceptances of 80% of all XL-Ireland’s shares but does not exercise its “squeeze out” right, then the non-accepting shareholders also have a statutory right to require the offeror to acquire their shares on the same terms as the original offer, or such other terms as the offeror and the non-tendering shareholders may agree or on such terms as an Irish court, on application of the offeror or non-tendering shareholder, may order. If XL-Ireland shares were listed on the Irish Stock Exchange or another regulated stock exchange in the European Union, this 80% threshold would be increased to
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agreement of all of its creditors to the scheme. In either case, dissenting shareholders do not have express statutory appraisal rights, but the Bermuda Court will only sanction a scheme if it is fair. Shares owned by the offeror can be voted to approve the scheme but the Bermuda Court will be concerned to see that the shareholders approving the scheme are fairly representative of the general body of shareholders.
Under the Bermuda Companies Act, any scheme must be approved by a majority in number representing three quarters in value of the shareholders present and voting either in person or by proxy at the requisite special general meeting. This threshold cannot be reduced by the company’s bye-laws. If there are dissenting shareholders who hold more than 10% of the shares, the Bermuda Court might be persuaded not to exercise its discretion to sanction the scheme on the ground that the scheme constitutes a takeover within Section 102 of the Bermuda Companies Act and requires a 90% acceptance. This 90% requirement cannot be reduced by the company’s bye-laws or otherwise.
A Bermuda company may effect a squeeze-out of a minority shareholder in a Bermuda company by way of a general offer followed by a squeeze-out under Section 102 of the Bermuda Companies Act. Broadly, if the offer is approved by the holders of 90% in value of the shares which are the subject of the offer, the offeror can compulsorily acquire the shares of dissenting shareholders. Shares owned by the offeror or its subsidiaries or their nominees at the date of the offer do not, however, count towards the 90%. If the offeror or any of its subsidiaries or any nominee of the offeror, or any of its subsidiaries together already own more than 10% of the shares in the subject company at the date of the offer, the offeror must offer the same terms to all holders of the same class and the holders who accept the offer, besides holding not less than 90% in value of the shares, must
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Provision
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XL-Ireland
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XL-Bermuda
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90% in value and voting rights of those shares;
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by way of a merger with another company (including an Irish incorporated body corporate) pursuant to the Irish Companies Act 2014; and
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by way of a merger with a company incorporated in the European Economic Area under the European Commission (Cross-Border Mergers) Regulations 2008, which implement the European Union Cross Border Merger Directive 2005/56 in Ireland. Such a merger must be approved by a special resolution. Shareholders also may be entitled to have their shares acquired for cash. See “—Appraisal Rights” below.
Under Irish law, Board of Directors’ approval, but not shareholder approval, is required for a sale, lease or exchange of all or substantially all of the assets of XL-Ireland, except that such a transaction between XL-Ireland and a director of XL-Ireland or a person connected to such a director may require shareholder approval.
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also represent no less than 75% in number of the holders of those shares, although the additional restrictions should not apply if the offer is made by a subsidiary of a parent (where the subsidiary does not own more than 10% of the shares of the subject company) even where the parent owns more than 10% of the shares of the subject company, provided that the subsidiary and the parent are not nominees. The percentages above cannot be varied by the company’s bye-laws.
The 90% acceptance must be obtained within four months after the making of the offer and, once obtained, the compulsory acquisition may be commenced within two months of the acquisition of the 90%. Dissenting shareholders do not have express appraisal rights but are entitled to seek relief (within one month of the compulsory acquisition notice) from the Bermuda Court which has power to make such orders as it thinks fit. The above time frames cannot be varied by the company’s bye-laws.
There is an alternative squeeze-out mechanism exercisable by the holders of 95% or more of the shares or any class of shares serving notice on the remaining shareholders or class of shareholders under Section 103 of the Bermuda Companies Act. Dissenting shareholders have a right to apply to the Bermuda Court within one month of the compulsory acquisition notice to have the value of their shares appraised by the Bermuda Court, but these appraisal rights differ from the appraisal rights in a merger, in that under Section 103 of the Bermuda Companies Act, if one dissenting shareholder applies to court and is successful in obtaining a higher valuation, that valuation must be paid to all shareholders being squeezed out. The above 95% threshold cannot be varied by the company’s bye-laws.
Amalgamations and Mergers:
Under the Bermuda Companies Act, the amalgamation or merger of a Bermuda
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Provision
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XL-Ireland
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XL-Bermuda
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company with another company (wherever incorporated) (other than certain affiliated companies) requires, subject to the company’s bye-laws, the amalgamation or merger to be approved by the company’s board of directors and by its shareholders. The Bermuda Companies Act prescribes approval by 75% of shareholders but permits companies to reduce this in its bye-laws to a simple majority.
If Proposal Number Ten is approved by shareholders, the XL-Bermuda bye-laws will require that amalgamation or merger must be approved by (a) 75% of the votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at a general meeting or (b) if the XL-Bermuda Board has unanimously approved the proposed amalgamation or merger, a majority of votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at such general meeting.
If Proposal Number Ten is not approved by shareholders, the XL-Bermuda bye-laws will require that any amalgamation or merger must be approved by 75% of the votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at such general meeting.
For purposes of approval of an amalgamation or merger, all shares, whether or not otherwise entitled to vote, carry the right to vote. Holders of a separate class of shares are entitled to a separate class vote if the rights of such class would be varied by virtue of the amalgamation or merger.
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Disclosure of Interests in Shares
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| | Under the Irish Companies Acts 2014, a shareholder of XL-Ireland must notify XL-Ireland if, as a result of a transaction, (1) the shareholder will be interested in 3% or more of the XL-Ireland shares that carry voting rights or (2) the shareholder will cease to be interested in 3% or more of the XL-Ireland shares that carry voting rights. In addition, where a shareholder | | | Under Bermuda law, securities may be offered or sold in Bermuda only in compliance with provisions of the Investment Business Act 2003, the Exchange Control Act of 1972, and related regulations of Bermuda that regulate the sale of securities in Bermuda. In addition, specific permission is required from the BMA, pursuant to the provisions of the Exchange Control Act | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | is interested in 3% or more of the relevant XL-Ireland shares, the shareholder must notify XL-Ireland of any alteration of its interest that brings its total holding through the nearest whole percentage number, whether an increase or a reduction. The relevant percentage figure is calculated by reference to the aggregate nominal value of the shares in which the shareholder is interested as a proportion of the entire nominal value of the relevant class of share capital. Where the percentage level of the shareholder’s interest does not amount to a whole percentage, this figure may be rounded down to the next whole number. All such disclosures must be notified to XL-Ireland within 5 business days of the event that gave rise to the requirement to notify. Where a person fails to comply with the notification requirements described above, no right or interest of any kind whatsoever in respect of any shares in XL-Ireland concerned, held by such person, will be enforceable by such person, whether directly or indirectly, by action or legal proceeding. However, such person may apply to the Irish High Court to have the rights attaching to its shares reinstated. | | | of 1972 and related regulations, for all issuances and transfers of securities of Bermuda companies, other than in cases where the BMA has granted a general permission. The BMA, in its policy dated June 1, 2005, provides that where any equity securities of a Bermuda company, which would include the XL-Bermuda common shares, are listed on an appointed stock exchange (the NYSE is deemed to be an appointed stock exchange under Bermuda law), general permission is given for the issue and subsequent transfer of any securities of such company from and/or to a non-resident of Bermuda, for as long as any equity securities of the company remain so listed. | |
| | | In addition to the disclosure requirement described above, under the Irish Companies Act 2014, XL-Ireland may by notice in writing, and must, on the requisition of shareholders holding 10% or more of the paid up capital of the company carrying voting rights, require a person whom XL-Ireland knows or has reasonable cause to believe to be, or at any time during the three years immediately preceding the date on which such notice is issued, to have been interested in shares comprised in XL-Ireland’s relevant share capital to: (1) indicate whether or not it is the case, and (2) where such person holds or has during that time held an interest in the XL-Ireland shares, to give certain further information as may be required by XL-Ireland including particulars of such person or beneficial owner’s past or | | | There is no equivalent disclosure provision under Bermuda law. | |
Provision
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XL-Ireland
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XL-Bermuda
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present interests in XL-Ireland shares. Any information given in response to the notice is required to be given in writing within such reasonable time as may be specified in the notice.
Where such a notice is served by XL-Ireland on a person who is or was interested in XL-Ireland shares and that person fails to give XL-Ireland any information required within the reasonable time specified, XL-Ireland may apply to court for an order directing that the affected shares be subject to certain restrictions. Under the Irish Companies Act 2014, the restrictions that may be placed on the shares by the court are as follows:
(1)
any transfer of those shares, or, in the case of unissued shares, any transfer of the right to be issued with shares and any issue of such shares, shall be void;
(2)
no voting rights shall be exercisable in respect of those shares;
(3)
no further shares shall be issued in respect of those shares or in pursuance of any offer made to the holder of those shares; and
(4)
no payment shall be made of any sums due from XL-Ireland on those shares, whether in respect of capital or otherwise.
Where shares in XL-Ireland are subject to these restrictions, the court may order the shares to be sold and may also direct that the shares shall cease to be subject to these restrictions.
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| | | In addition, persons or groups (within the meaning of the Exchange Act) beneficially owning 5% or more of XL-Ireland’s ordinary shares must comply with the reporting requirements under Regulation 13D-G of the Exchange Act. | | | In addition, persons or groups (within the meaning of the Exchange Act) beneficially owning 5% or more of the XL-Bermuda common shares must comply with the reporting requirements under Regulation 13D-G of the Exchange Act. | |
Appraisal Rights
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| | Generally, under Irish law, shareholders of an Irish company do not have statutory appraisal rights. If XL-Ireland | | | Under the Bermuda Companies Act, a dissenting shareholder of an amalgamating or merging company who | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | is being merged as the transferor company with another company pursuant to the Irish Companies Act 2014 or with another European Economic Area company under the European Commission (Cross-Border Mergers) Regulations 2008, (1) a shareholder of XL-Ireland who voted against the special resolution approving the merger or, (2) if 90% of the shares of XL-Ireland are held by the successor company, any other shareholder of XL-Ireland, may be entitled to require that the successor company acquire its shares for cash. | | | did not vote in favor of the amalgamation or merger and does not believe it has been offered fair value for its shares may within one month of the giving of the notice calling the meeting at which the amalgamation or merger was decided upon apply to the Bermuda Court to appraise the fair value of its shares. Where the Bermuda Court has appraised any such shares and the amalgamation or merger has not been consummated before the appraisal then, within one month of the Bermuda Court appraising the value of the shares, the company is entitled to either: | |
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(i)
pay to the dissenting shareholder an amount equal to the value of its shares as appraised by the Bermuda Court; or
(ii)
terminate the amalgamation or merger agreement in accordance with the Bermuda Companies Act.
Where the Bermuda Court has appraised the fair value of any shares and the amalgamation or merger has proceeded prior to the appraisal then, within one month of the Bermuda Court appraising the value of the shares, if the amount (if any) paid to the dissenting shareholder for his or her shares is less than that appraised by the Bermuda Court, the amalgamated or surviving company must pay to such shareholder the difference between the amount paid to such shareholder and the value appraised by the Bermuda Court.
There is no right of appeal from an appraisal by the Bermuda Court. The costs of any application to the Bermuda Court to appraise the fair value of any shares will be allocated between the company and the shareholder in the discretion of the Bermuda Court.
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Provision
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XL-Ireland
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XL-Bermuda
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Anti-Takeover Measures | | |
Shareholder Rights Plans and Share Issuances; Transfer Restriction
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Irish law does not expressly prohibit companies from issuing share purchase rights or adopting a shareholder rights plan as an anti-takeover measure.
XL-Ireland’s articles of association allow the Board of Directors of XL-Ireland to adopt any shareholder rights plan upon such terms and conditions as the Board of Directors deems expedient and in the best interest of XL-Ireland, subject to applicable law, including the Irish Takeover Rules and Substantial Acquisition Rules described below and the requirement for shareholder authorization for the issue of shares described above.
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| | XL-Bermuda’s bye-laws permit the Board, subject to applicable law, to adopt a shareholder rights plan. | |
| | | Subject to the Irish Takeover Rules described below, the Board of Directors of XL-Ireland also has the power to issue any authorized and unissued XL-Ireland shares on such terms and conditions as it may determine to be in the best interest of XL-Ireland. It is possible that the terms and conditions of any issue of shares could discourage a takeover or other transaction that holders of some or a majority of the XL-Ireland ordinary shares might believe to be in their best interest or in which holders of XL-Ireland ordinary shares might receive a premium for their shares over the then-market price of the shares. | | | ||
| | | The articles of association of XL-Ireland provide that the Board of Directors of XL-Ireland must decline to register a transfer of shares if it appears to the Board of Directors that the effect of such transfer would be to increase the number of the XL-Ireland Controlled Shares of any person to 10% or more of any class of voting shares of the total issued shares or of the voting power of the company. | | | XL-Bermuda’s bye-laws provide that the Board of Directors of XL-Bermuda must decline to register a transfer of shares if it appears to the Board of Directors that the effect of such transfer would be to increase the number of the XL-Bermuda Controlled Shares of any person to 10% or more of any class of voting shares of the total issued shares or of the voting power of the company. | |
| | | “XL-Ireland Controlled Shares” of a person (as defined in XL-Ireland’s | | | “XL-Bermuda Controlled Shares” of a person (as defined in XL-Bermuda’s | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | articles of association) include (1) all XL-Ireland shares owned directly, indirectly or constructively by that person (within the meaning of Section 958 of the U.S. Internal Revenue Code of 1986, as amended) or (2) all XL-Ireland shares owned directly, indirectly or constructively by that person or any “group” of which that person is a part, within the meaning of Section 13(d)(3) of the Exchange Act. | | | bye-laws) include (1) all XL-Bermuda shares owned directly, indirectly or constructively by that person (within the meaning of Section 958 of the U.S. Internal Revenue Code of 1986, as amended) or (2) all XL-Bermuda shares owned directly, indirectly or constructively by that person or any “group” of which that person is a part, within the meaning of Section 13(d)(3) of the Exchange Act. | |
| | | Irish Takeover Rules and Substantial Acquisition Rules | | | | |
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A tender offer by which a third party makes an offer generally to shareholders or a class of shareholders to acquire shares of any class conferring voting rights of XL-Ireland will be governed by the Irish Takeover Panel Act 1997 and the Irish Takeover Rules made thereunder and will be regulated by the Irish Takeover Panel (as well as being governed by the Exchange Act and the regulations of the SEC thereunder). The “General Principles” of the Irish Takeover Rules and certain important aspects of the Irish Takeover Rules are described below. Takeovers by means of a scheme of arrangement are also generally subject to these regulations.
General Principles
The Irish Takeover Rules are based on the following General Principles that will apply to any transaction regulated by the Irish Takeover Panel:
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in the event of an offer, all classes of shareholders of the target company should be afforded equivalent treatment and, if a person acquires control of a company, the other holders of securities must be protected;
•
the holders of securities in the target company must have sufficient time and information to allow them to make an informed decision regarding the offer. If the board of directors of the target company advises the holders of the securities
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| | Bermuda does not have any equivalent of the Irish Takeover Rules and Substantial Acquisition Rules. | |
Provision
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XL-Ireland
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XL-Bermuda
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with respect to the offer, it must advise on the effects of the implementation of the offer on employment, employment conditions and the locations of the target company’s place of business;
•
the board of a target company must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the offer;
•
false markets must not be created in the securities of the target company or any other company concerned by the offer in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the markets is distorted;
•
an offeror can only announce an offer after ensuring that it can fulfill in full any cash consideration offered, and after taking all reasonable measures to secure the implementation of any other type of consideration;
•
a target company may not be hindered in the conduct of its affairs for longer than is reasonable by an offer for its securities. This is a recognition that an offer will disrupt the day-to-day running of a target company particularly if the offer is hostile and the board of the target company must divert its attention to resist the offer; and
•
a “substantial acquisition” of securities (whether such acquisition is to be effected by one transaction or a series of transactions) will only be allowed to take place at an acceptable speed and shall be subject to adequate and timely disclosure.
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| | | Mandatory Offer | | | | |
| | | If an acquisition of shares were to increase the aggregate holding of an acquirer and its concert parties (which | | | There is no equivalent provision under Bermuda law. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | generally mean persons acting in concert with the acquirer) to shares carrying 30% or more of the voting rights in XL-Ireland, the acquirer and, depending on the circumstances, its concert parties would be mandatorily required (except with the consent of the Irish Takeover Panel) to make a cash tender offer for the remaining outstanding shares at a price not less than the highest price paid for the shares by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by an acquisition of shares by a person holding (together with its concert parties) shares carrying between 30% and 50% of the voting rights in XL-Ireland if the effect of such acquisition were to increase the percentage of the voting rights held by that person (together with its concert parties) by 0.05% within a 12 month period. | | | | |
| | | Voluntary Offer; Requirements to Make a Cash Offer and Minimum Price Requirements | | | | |
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A voluntary offer is a tender offer that is not a mandatory offer. If an offeror or any of its concert parties acquire XL-Ireland shares of the same class as the shares that are the subject of the voluntary offer within the period of three months prior to the commencement of the offer period, the offer price must be not less than the highest price paid for XL-Ireland shares of that class by the offeror or its concert parties during that period. The Irish Takeover Panel has the power to extend the “look back” period to 12 months if the Irish Takeover Panel, having regard to the General Principles, believes it is appropriate to do so.
If the offeror or any of its concert parties has acquired XL-Ireland shares of the same class as the shares that are the subject of the voluntary offer (1) during the period of 12 months prior to the commencement of the offer period which represent 10% or more of the nominal value of the issued shares of
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| | There is no equivalent provision under Bermuda law. | |
Provision
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XL-Ireland
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XL-Bermuda
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that class or (2) at any time after the commencement of the offer period, the offer shall be in cash (or accompanied by a full cash alternative) and the price per share shall be not less than the highest price paid by the offeror or its concert parties for shares (of that class) during, in the case of (1), the period of 12 months prior to the commencement of the offer period and, in the case of (2), the offer period. The Irish Takeover Panel may apply this rule to an offeror who, together with its concert parties, has acquired less than 10% of the nominal value of the issued shares of the class of shares that is the subject of the offer in the 12 month period prior to the commencement of the offer period if the Irish Takeover Panel, having regard to the General Principles, considers it just and proper to do so.
Similar rules of the Irish Takeover Panel will apply where, as part of a voluntary offer, XL-Ireland shares have been acquired in exchange for other shares or securities. If the offeror or any of its concert parties has acquired, in exchange for other shares or securities, XL-Ireland shares of the same class as the shares that are the subject of the voluntary offer (1) during the period of three months prior to the commencement of the offer period (which may be extended to 12 months if the Irish Takeover Panel, having regard to the General Principles, considers it just and proper to do so) which represent 10% or more of the nominal value of the issued shares of that class or (2) at any time after the commencement of the offer period, the offer or any alternative shall be in cash (or accompanied by a full cash alternative) and the price per share shall not be less than the highest price paid by the offeror or its concert parties for shares (of that class) offer, shall be made in exchange for securities of the same issuer (“exchange securities”) and of the same class as the securities (the “consideration securities”) delivered by the offeror or any of its concert parties (which may include new or existing
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Provision
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XL-Ireland
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XL-Bermuda
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securities in the offeror or any other person) in exchange for the securities of the offeree acquired by the offeror or that person and such exchanged securities shall be offered on the basis of a ratio of exchange securities to securities of the offeree that is equal to the highest ratio of any consideration security delivered by the offeror or any person acting in concert with it in exchange for any security of the offeree owing, in the case of (1), the period of three months prior to the commencement of the offer period (as may be extended at the discretion of the Irish Takeover Panel, as outlined above) and, in the case of (2), the offer period. The Irish Takeover Panel may apply this rule to an offeror who, together with its concert parties, has acquired less than 10% of the nominal value of the issued shares of the class of shares that is the subject of the offer in the three month period prior to the commencement of the offer period if the Irish Takeover Panel, having regard to the General Principles, considers it just and proper to do so.
An offer period will generally commence from the date of the first announcement of the offer or proposed offer.
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| | | Substantial Acquisition Rules | | | | |
| | | The Irish Takeover Rules also contain rules governing substantial acquisitions of shares which restrict the speed at which a person may increase his or her holding of shares and rights over shares to an aggregate of between 15% and 30% of the voting rights of XL-Ireland. Except in certain circumstances, an acquisition or series of acquisitions of shares or rights over shares representing 10% or more of the voting rights of XL-Ireland is prohibited, if such acquisition(s), when aggregated with shares or rights already held, would result in the acquirer holding 15% or more but less than 30% of the voting rights of XL-Ireland and such acquisitions are made within a period of 7 days. These rules also require | | | There are no equivalent rules under Bermuda law. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | accelerated disclosure of certain other acquisitions of shares or rights over shares relating to such holdings. | | | | |
| | | Frustrating Action | | | | |
| | | Under the Irish Takeover Rules, the Board of Directors of XL-Ireland is not permitted to take any action that might frustrate an offer for the XL-Ireland shares during the course of an offer or at any earlier time at which the Board of Directors has reason to believe an offer is or may be imminent, except as noted below. Potentially frustrating actions such as (1) the issue of shares, options or convertible securities, (2) material disposals, (3) entering into contracts other than in the ordinary course of business, or (4) any action, other than seeking alternative offers, which may result in frustration of an offer, are prohibited during the course of an offer or at any time during which the Board of Directors has reason to believe an offer is or may be imminent. Exceptions to this prohibition are available where: | | | There is no equivalent provision under Bermuda law. | |
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(a)
the action is approved by XL-Ireland’s shareholders at a general meeting; or
(b)
with the consent of the Irish Takeover Panel, where:
(i)
the Irish Takeover Panel is satisfied the action would not constitute a frustrating action;
(ii)
the holders of at least 50% of the voting rights state in writing that they approve the proposed action and would vote in favor of it at a general meeting;
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(iii)
the action is in accordance with a contract entered into prior to the announcement of the offer (or the time at which the Board of Directors has reason to believe that an offer may be imminent); or
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(iv)
the decision to take such action was made before the announcement of the offer (or
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Provision
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XL-Ireland
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XL-Bermuda
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the time at which the Board of Directors has reason to believe that an offer is or may be imminent) and either has been at least partially implemented or is in the ordinary course of business.
For other provisions that could be considered to have an anti-takeover effect, please see above at “—Pre-emption Rights, Share Warrants and Share Options” and “—Disclosure of Interests in Shares” and below at “—Election of Directors,” “—Appointment of Directors by the Board,” “—Removal of Directors,” “—Board and Committee Composition; Management,” “—Shareholder Consent to Action Without Meeting,” “—Amendment of Governing Documents,” “—Director Nominations,” “—Proposals of Shareholders,” “—Voting,” “—Variation of Rights Attaching to a Class or Series of Shares,” and “—Transfer and Registration of Shares.”
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Election of Directors
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| | XL-Ireland’s articles of association provide for a minimum of three directors and a maximum of 13 directors, plus such number of additional directors, if any, provided for in the terms of issue of any preference shares. The shareholders of XL-Ireland may from time to time increase or reduce the maximum or minimum number of directors by special resolution (but under Irish law, the minimum number of directors must not be less than two). The maximum number will automatically be increased to accommodate the exercise of the rights of the holders of any class or series of shares then in issue having special rights to nominate or appoint directors in accordance with their terms. The XL-Ireland articles of association do not include analogous provisions because it is unclear whether a provision in an Irish public limited company’s articles of association permitting the board to set the maximum number of directors would be valid in all circumstances under Irish law. | | | XL-Bermuda’s bye-laws provide for a minimum of three directors and a maximum of 15 directors, with the actual number to be determined from time to time by the XL-Bermuda Board. Under Bermuda law, the minimum number of directors must not be less than one, but there is no restriction on the maximum number of directors. | |
Provision
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XL-Ireland
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XL-Bermuda
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Directors are elected or appointed at the annual general meeting or at any extraordinary general meeting called for that purpose. Each director is elected by the affirmative vote of a majority of the votes cast with respect to such director. However, to the extent that resolutions passed in an election of directors would result in the maximum number of directors provided for in the articles of association of XL-Ireland being exceeded, then the directors receiving the lowest number of votes in such election will not be elected.
XL-Ireland’s Board of Directors will cease to be classified following the completion of XL-Ireland’s 2016 annual general meeting.
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| | The default position under the Bermuda Companies Act is that, except in the case of vacancies, directors are elected or appointed at the annual general meeting or at any special general meeting called for that purpose. Each director is elected by the affirmative vote of a majority of the votes cast at the relevant shareholder meeting with respect to such director. XL-Bermuda’s bye-laws do not set a higher threshold. | |
Appointment of Directors by the Board
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| | Under XL-Ireland’s articles of association, the Board of Directors of XL-Ireland has the authority to appoint directors to XL-Ireland’s Board of Directors, either to fill a vacancy or as an additional director subject to the maximum in the articles of association. A vacancy on the Board of Directors of XL-Ireland created by the removal of a director may be filled by an ordinary resolution of the shareholders at the meeting at which such director is removed and, in the absence of such election or appointment, the remaining directors may fill the vacancy. The Board of Directors of XL-Ireland may fill a vacancy by an affirmative vote of a majority of the directors constituting a quorum, provided that if there is an insufficient number of directors to constitute a quorum, the Board may nonetheless act to fill such vacancies or call a general meeting of the shareholders. Vacancies with respect to directors elected by the holders of preference shares will be filled as described above under “—Election of Directors.” Under XL-Ireland’s articles of association, if the Board fills a vacancy, the director’s term expires at the same time as the term of the other directors of the same class of directors to which the director is appointed. | | | Under XL-Bermuda’s bye-laws, the XL-Bermuda Board has the authority at any time and from time to time to appoint any individual to be a director so as to fill a vacancy occurring as the result of an increase in the size of the XL-Bermuda Board, the removal of a director or a director’s office otherwise being vacated. A director so appointed will hold office for the balance of the term of such vacant XL-Bermuda Board position or until such director’s successor is elected or appointed or such director’s office is otherwise vacated. | |
Provision
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XL-Ireland
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XL-Bermuda
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Removal of Directors
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| | The Irish Companies Act 2014 provides that, notwithstanding anything contained in the articles of association of a company or in any agreement between that company and a director, the shareholders may by an ordinary resolution remove a director from office before the expiration of his or her term, provided that notice of any such resolution be given to the shareholders not less than 28 days before the meeting at which the director is to be removed, and the director will be entitled to be heard at such meeting. The power of removal is without prejudice to any claim for damages for breach of contract (e.g., employment contract) that the director may have against XL-Ireland in respect of his or her removal. The XL-Ireland articles of association include a provision reflecting the requirements of Irish law. | | | The Bermuda Companies Act provides that a director may be removed from office by the shareholders at a special general meeting called for that purpose. The notice of a meeting convened for the purpose of removing a director must contain a statement of intention to do so and be served on such director not less than 14 days before the meeting. The director subject to removal will be entitled to be heard on the motion for his removal. XL-Bermuda’s bye-laws include a provision reflecting these default requirements of Bermuda law. | |
Board and Committee Composition; Management
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| | The articles of association of XL-Ireland allocate authority over the management of XL-Ireland to the Board of Directors of XL-Ireland. The Board of Directors may then delegate management of XL-Ireland to committees of the Board of Directors or such other persons as it thinks fit. Regardless of any delegation, the Board of Directors of XL-Ireland will remain responsible, as a matter of Irish law, for the proper management of the affairs of XL-Ireland. The XL-Ireland Board of Directors may create new committees or change the responsibilities of existing committees from time to time. | | |
XL-Bermuda’s bye-laws allocate authority over the management of XL-Bermuda to the XL-Bermuda Board and the XL-Bermuda Board may exercise all the powers of XL-Bermuda (except those powers that are required by the Bermuda Companies Act and XL-Bermuda’s bye-laws to be exercised by the shareholders of XL-Bermuda).
The XL-Bermuda Board may delegate management (including its powers, discretions and authorities) of XL-Bermuda to committees of the XL-Bermuda Board or to any company, firm or person or any fluctuating body of persons for such period and subject to such conditions as the XL-Bermuda Board may think fit. Regardless of any delegation, the XL-Bermuda directors cannot absolve themselves entirely of their responsibility by delegation to others.
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Duties of the Board of Directors
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| | The directors of XL-Ireland have certain statutory and fiduciary duties. All of the directors have equal and overall responsibility for the management of XL-Ireland (although directors who also serve as employees will have additional | | | The directors of XL-Bermuda have certain statutory and fiduciary duties. All of the directors individually owe a fiduciary duty and a duty of skill and care in their dealings with or on behalf of XL-Bermuda and the Bermuda | |
Provision
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XL-Ireland
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XL-Bermuda
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responsibilities and duties arising under their employment agreements and will be expected to exercise a greater degree of skill and diligence than non-executive directors).
The principal statutory duties include fiduciary duties of acting in good faith in what the director considers to be the interests of the company, acting honestly and responsibly in relation to the conduct of the affairs of the company and of exercising due care and skill in addition to other statutory duties of ensuring the maintenance of proper books of accounts, having annual accounts prepared, having an annual audit performed, maintaining certain registers and making certain filings as well as disclosure of personal interests. Particular duties also apply to directors of insolvent companies (for example, the directors could be liable for sanctions where they are deemed by the court to have carried on the business of XL-Ireland while insolvent, without due regard to the interests of creditors). For public limited companies like XL-Ireland, directors are under a specific duty to ensure that the corporate secretary is a person with the requisite knowledge and experience to discharge the role.
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Companies Act imposes various duties on directors and officers of XL-Bermuda with respect to certain matters of management and administration of XL-Bermuda.
The Bermuda Companies Act imposes a duty on directors and officers of a Bermuda company:
(i)
to act honestly and in good faith with a view to the best interests of the company;
(ii)
to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; and
(iii)
to disclose any interest in any material contract or proposed material contract or person that is party to a material contract or proposed material contract to the board of the company at the first opportunity.
Under Bermuda law, a person who is a director may be found personally liable for any breach of his or her fiduciary duties. The Bermuda Companies Act provides that in any proceedings for negligence, default, breach of duty or breach of trust against any officer (which includes a director), if it appears to a court that such officer is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he or she has acted honestly and reasonably, and that, having regard to all the circumstances of the case, including those connected with his or her appointment, he or she ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him or her, either wholly or partly, from any liability on such terms as the court may think fit. This provision has been interpreted to apply only to actions brought by or on behalf of a company against such officers.
In XL-Bermuda’s bye-laws, each XL-Bermuda shareholder and XL-Bermuda agree to waive any claim or
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Provision
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XL-Ireland
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XL-Bermuda
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right of action they might have, whether individually or by or in the right of XL-Bermuda, against any “Indemnified Person” (which includes any director, officer or resident representative (if applicable)) on account of any action taken by such Indemnified Person, or the failure of such Indemnified Person to take any action in the performance of his or her duties with or for XL-Bermuda; provided, however, that such waiver does not extend to any claims or rights of action arising out of any fraud or dishonesty which may attach to such Indemnified Person.
A director of a Bermuda company is not liable for the acts of co-directors or company officers solely by virtue of being a director. Rather, a director may rely in good faith on executives who have been appointed specifically for the purpose of attending to the detail of management. However, directors cannot absolve themselves entirely of their responsibility by delegation to others.
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Indemnification of Directors and Officers; Insurance
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| | To the fullest extent permitted by Irish law, XL-Ireland’s articles of association confer an indemnity on its directors and officers. However, this indemnity is limited by the Irish Companies Act 2014, which prescribes that an advance commitment to indemnify only permits a company to pay the costs or discharge the liability of a director or corporate secretary where judgment is given in favor of the director or corporate secretary in any civil or criminal action in respect of such costs or liability, or where an Irish court grants relief because the director or corporate secretary acted honestly and reasonably and ought fairly to be excused. Any provision whereby an Irish company seeks to commit in advance to indemnify its directors or corporate secretary over and above the limitations imposed by the Irish Companies Act 2014 will be void under Irish law, whether contained in its articles of association or any contract between the company and the director or corporate secretary. As a result, to the | | |
To the fullest extent permitted by Bermuda law, XL-Bermuda’s bye-laws and the Bermuda Companies Act confer an indemnity on its directors and any other officers against losses arising or liability resulting from their negligence, default, breach of duty or breach of trust in relation to XL-Bermuda; provided, that XL-Bermuda is not permitted to indemnify any such person against any liability arising from their fraud or dishonesty.
XL-Bermuda’s bye-laws provide that XL-Bermuda will indemnify every Indemnified Person out of the assets of XL-Bermuda against all liabilities, actions, costs, charges, losses, damages and expenses (including but not limited to liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him or her by reason of any act done, conceived in or omitted in the conduct of XL-Bermuda’s business or in the
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Provision
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XL-Ireland
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XL-Bermuda
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| | | extent the indemnification provisions in XL-Ireland’s articles of association apply to directors and the corporate secretary of XL-Ireland, the indemnity is limited. This restriction does not apply to executives who are not directors or the corporate secretary, or other persons who would be considered “officers” within the meaning of that term under the Irish Companies Act 2014, of XL-Ireland. | | | discharge of his or her duties or in defending any proceedings, whether civil or criminal; provided, such expenses and liabilities are not found by a court of competent jurisdiction (upon entry of a final non-appealable judgment) to be the result of any such Indemnified Person’s fraud and dishonesty. | |
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XL-Ireland’s articles of association also contain indemnification and expense advancement provisions for persons who are not directors or the corporate secretary of XL-Ireland.
XL-Ireland is permitted under its articles of association and the Irish Companies Act 2014 to take out directors’ and officers’ liability insurance, as well as other types of insurance, for its directors, officers, employees and agents.
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In addition, XL-Bermuda is expected to enter into indemnification agreements with each of its directors. These agreements would provide XL-Bermuda’s directors with contractual assurance of their rights to indemnification against litigation risks and expenses, which indemnification is intended to be greater than that afforded by XL-Bermuda’s organizational documents.
XL-Bermuda’s bye-laws also provide that XL-Bermuda may purchase and maintain insurance for the benefit of any indemnified person against any liability incurred by him or her under the Bermuda Companies Act in his or her capacity as a director or officer or indemnifying such indemnified person in respect of any loss arising or liability attaching to him or her by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the indemnified person may be guilty in relation to XL-Bermuda or any subsidiary thereof.
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Limitation on Director Liability
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| | The articles of association of XL-Ireland contain an exemption from liability for its directors and executives. However, under Irish law, a company may not exempt its directors or corporate secretary from liability for negligence or a breach of duty or a breach of trust. Where a breach of duty has been established, directors or the corporate secretary may be statutorily exempted by an Irish court from personal liability for negligence, default or breach of duty or trust if, among other things, the court determines that they have acted honestly and reasonably, | | | As permitted by Bermuda law, the XL-Bermuda bye-laws contain a provision by which each XL-Bermuda shareholder agrees to waive any claim or right of action it might have, whether individually or by or in the right of XL-Bermuda, against any director, officer or any other Indemnified Person on account of any action taken by such director or officer or other Indemnified Person, or the failure of such director or officer or other Indemnified Person to take any action in the performance of his or her duties with or for XL-Bermuda; however, such waiver does not extend to | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | and that they may fairly be excused as a result. | | | any matter in respect of any fraud or dishonesty which may attach to such director, officer or other Indemnified Person. Further, under Bermuda law, a company may not indemnify and exempt from liability any director, officer or auditor against any liability arising from their fraud or dishonesty. | |
Conflicts of Interest
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As a matter of Irish law, a director is under a general fiduciary duty to avoid conflicts of interest. Irish law and the XL-Ireland articles of association provide that:
(1)
a director may be a director of or otherwise interested in a company relating to XL-Ireland and will not be accountable to XL-Ireland for any remuneration or other benefits received as a result, unless XL-Ireland otherwise directs;
(2)
a director or a director’s firm may act for XL-Ireland in a professional capacity other than as auditor; and
(3)
a director may hold an office or place of profit in XL-Ireland and will not be disqualified from contracting with XL-Ireland.
If a director has a personal interest in an actual or proposed contract with XL-Ireland, the director must declare the nature of his or her interest at a meeting of the Board of Directors of XL-Ireland, and XL-Ireland is required to maintain a register of such declared interests that must be available for inspection by the shareholders. Such a director may vote on any resolution of the Board of Directors in respect of such a contract, and such a contract will not be voidable solely as a result.
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As a matter of Bermuda law, a director is under a general fiduciary duty to avoid conflicts of interest. XL-Bermuda’s bye-laws state that:
(1)
a director may hold any other office or place of profit under XL-Bermuda (other than the office of auditor – discussed below) in conjunction with his or her office of director;
(2)
a director, or any person associated with, related to or affiliated with a director, may act in a professional capacity for XL-Bermuda. However, a director or director’s firm, partner or a company associated with, related to or affiliated with a director is not authorized to act as auditor of XL-Bermuda; and
(3)
provided a director has declared his or her direct or indirect interest in a contract or proposed contract or arrangement with XL-Bermuda and further provided that the chairperson of the relevant meeting has not disqualified the interested director, that director may vote at, and be counted in the quorum of, such meeting.
Directors are nonetheless required to exercise their judgment solely in the interests of XL-Bermuda.
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Shareholders’ Suits
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| | In Ireland, the decision to institute proceedings on behalf of a company is generally taken by the company’s board of directors. In certain limited circumstances, a shareholder may be entitled to bring a derivative action on behalf of XL-Ireland. The central question at issue in deciding whether a minority shareholder may be permitted | | |
In Bermuda, the rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under legislation or judicial precedent in other jurisdictions.
The Bermuda Court ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence an action in the
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Provision
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XL-Ireland
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XL-Bermuda
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to bring a derivative action is whether, unless the action is brought, a wrong committed against XL-Ireland would otherwise go unredressed. The cause of action may be against the director, another person or both.
A shareholder may also be permitted to bring proceedings against XL-Ireland in his or her own name where the shareholder’s rights as such have been infringed or where the affairs of XL-Ireland are being conducted, or the powers of the Board of Directors of XL-Ireland are being exercised, in a manner oppressive to any shareholder or shareholders or in disregard of their interests as shareholders. Oppression connotes conduct that is burdensome, harsh or wrong. This is an Irish statutory remedy and the court can grant any order it sees fit, including providing for the purchase or transfer of the shares of any shareholder.
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company’s name to remedy a wrong done to the company where the act complained of is alleged to be beyond its corporate power or is illegal or would result in the violation of its memorandum of association or bye-laws. Furthermore, consideration would be given by the Bermuda Court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of shareholders than that which actually approved it or where a power vested in the board of directors has been exercised for an improper purpose.
When the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interests of some part of the shareholders, one or more shareholders may apply to the Bermuda Court, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
The XL-Bermuda bye-laws contain a provision by which each XL-Bermuda shareholder agrees to waive any claim or right of action it might have, whether individually or by or in the right of XL-Bermuda, against any director, officer or any other Indemnified Person on account of any action taken by such director or officer or other Indemnified Person, or the failure of such director or officer or other Indemnified Person to take any action in the performance of his duties with or for XL-Bermuda; however, such waiver does not extend to any matter in respect of any fraud or dishonesty which may attach to such director, officer or other Indemnified Person.
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Shareholder Consent to Action Without Meeting
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| | XL-Ireland’s articles of association provide that anything which may be done by resolution of XL-Ireland at a general meeting may be done by resolution in writing, but only if it is signed by or on behalf of all of the shareholders who would be entitled to | | | XL-Bermuda’s bye-laws provide that anything which may be done by resolution of XL-Bermuda at a general meeting may be done by resolution in writing, but only if it is signed by or on behalf of all of the shareholders who would be entitled to attend the relevant | |
Provision
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XL-Ireland
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XL-Bermuda
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meeting and vote on the relevant resolution.
Shareholders may act by written resolution except to remove directors or auditors.
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Annual Meetings of Shareholders
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XL-Ireland is required under Irish law to hold an annual general meeting within 18 months of incorporation and is required to hold each annual general meeting at intervals of no more than 15 months thereafter, provided that an annual general meeting is held in each calendar year following the first annual general meeting, no more than nine months after XL-Ireland’s fiscal year-end. XL-Ireland’s articles of association include a provision requiring annual general meetings to be held within such time periods as required by Irish law. Notice of a general meeting must be given to all shareholders, each director and the auditors of XL-Ireland. Irish law requires at least 21 days’ notice in writing for an annual general meeting. XL-Ireland’s articles of association provide a minimum notice period of 30 days for an annual general meeting.
The only matters which must, as a matter of Irish law, be transacted at an annual general meeting are the presentation of the annual profit and loss account, balance sheet and reports of the directors and auditors, the appointment or reappointment of auditors, the review by the shareholders of XL-Ireland’s affairs and, unless the articles of association provide otherwise, and the fixing of the auditor’s remuneration (or delegation of same) and the declaration of a dividend. If no resolution is made in respect of the reappointment of an auditor at an annual general meeting, the previous auditor will be deemed to have continued in office, subject to certain limited exceptions. The XL-Ireland articles of association provide that, at each annual general meeting, directors will be elected to fill the board seats of those directors whose terms expire at that annual general meeting.
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XL-Bermuda is required under Bermuda law to hold an annual general meeting every calendar year unless the shareholders elect to dispense with the holding of annual general meetings. Dispensation can be for a specified number of years or indefinitely although in practice this power will not be exercised for Bermuda companies listed on an onshore stock exchange, such as XL-Bermuda. The statutory general meeting held in the year of incorporation is deemed to be the annual general meeting for that year.
The only matters which must, as a matter of Bermuda law, be transacted at an annual general meeting are:
(1)
subject to the listed company exemption discussed below, the presentation of the annual financial statements and reports of the auditors;
(2)
appointment of the directors for the next year; and
(3)
the appointment of new auditors and the fixing of the auditor’s remuneration (unless the bye-laws provide that the auditor’s remuneration is to be fixed by the directors).
The presentation of the annual accounts, balance sheet and reports of the auditors and the appointment of the auditors at the annual general meeting can be waived by all of the shareholders and directors of XL-Bermuda. Furthermore, because XL-Bermuda will be a company listed on an appointed stock exchange, the Bermuda Companies Act permits XL-Bermuda to send instead of the full annual accounts, balance sheet and reports of the auditors as described above, summarized financial statements for the relevant period, which shall also be open for inspection at XL-Bermuda’s registered office in Bermuda. XL-Bermuda must send with such
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Provision
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XL-Ireland
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XL-Bermuda
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| | | At any annual general meeting, only such business may be conducted as has been brought before the meeting (1) by or at the direction of the Board of Directors of XL-Ireland, (2) in certain circumstances, at the direction of the Irish High Court or as required by law, or (3) business that the chairman of the meeting determines is properly within the scope of the meeting. In addition, shareholders entitled to vote at an annual general meeting may make nominations of candidates for election to the Board of Directors of XL-Ireland as described below under “—Director Nominations.” |
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summarized financial statements (i) the auditor’s report on such summarized financial statements and (ii) a notice informing the member how to notify XL-Bermuda that such member elects to receive the full financial statements and reports of the auditors for the relevant period or subsequent periods or both. When sending such summary financial statements, XL-Bermuda will also be required under the Bermuda Companies Act to make available for inspection by the public at its registered office in Bermuda a copy of the full financial statements described above.
Under Section 79 of the Bermuda Companies Act, a Bermuda company is required to circulate a members’ resolution on the requisition of either:
(a)
members representing not less than 5% of the total voting rights of all members; or
(b)
a minimum of 100 members.
A Bermuda company is required to circulate notice of such resolution and a statement from the requisitionists of not more than 1,000 words with respect to the matter referred to in the proposed resolution. A Bermuda company is only required to give notice of the resolutions and to circulate the statement from the requisitionists where a copy of such requisition is (a) in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting, or (b) in the case of any other requisition, not less than one week before the meeting. However, if after a copy of the requisition requiring notice of a resolution has been deposited at the registered office of the company, an AGM is called for a date within six weeks or less after the copy has been deposited, the copy though not deposited within the time required shall be deemed to have been properly deposited.
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Extraordinary Meetings of Shareholders
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| | Extraordinary general meetings of XL-Ireland may be convened (1) by the Board of Directors of XL-Ireland, (2) on requisition of the shareholders holding the number of shares of XL-Ireland prescribed by the Irish | | |
Special general meetings of XL-Bermuda shareholders may be convened by:
(1)
the XL-Bermuda Board;
(2)
when requisitioned by shareholders pursuant to the provisions of Section
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Provision
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XL-Ireland
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XL-Bermuda
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Companies Act 2014 (currently 10% of the paid up share capital of the company carrying voting rights), (3) in certain circumstances, on requisition of XL-Ireland’s auditors, or (4) by shareholders holding the number of shares of XL-Ireland prescribed by the Irish Companies Act 2014 (currently 50% of the paid up share capital of the company carrying voting rights).
Extraordinary general meetings are generally held for the purposes of approving shareholder resolutions of XL-Ireland as may be required from time to time. The business to be conducted at any extraordinary general meeting must be set forth in the notice of the meeting. At least 30 days’ notice of an extraordinary general meeting must be given to shareholders, each director and the auditors of XL-Ireland.
In the case of an extraordinary general meeting requisitioned holders of XL-Ireland ordinary shares, the proposed purpose of the meeting must be set out in the requisition notice of the meeting. The requisition notice can propose any business to be considered at the meeting. Under Irish law, upon receipt of this requisition notice, the Board of Directors of XL-Ireland has 21 days to convene the extraordinary general meeting of XL-Ireland’s shareholders to vote on the matters set out in the requisition notice. This meeting must be held within two months of receipt of the requisition notice. If the Board of Directors does not proceed to convene the meeting within such 21-day period, the requisitioning shareholders, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a meeting, which meeting must be held within three months of the receipt of the requisition notice by the Board of Directors.
If the Board of Directors of XL-Ireland becomes aware that the net assets of XL-Ireland are half or less of the amount of XL-Ireland’s called-up share capital, the Board of Directors of
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74 of the Bermuda Companies Act. Under Section 74 of the Bermuda Companies Act and XL-Bermuda’s bye-laws, the shareholders may requisition a special general meeting, provided they hold at the date of the deposit of the requisition shares representing not less than 10% of the paid-up capital of XL-Bermuda carrying a right to vote at general meetings;
(3)
the chairperson or the chief executive officer;
(4)
any two directors of XL-Bermuda; or
(5)
any director and the Secretary of XL-Bermuda.
Special general meetings are generally held for the purposes of approving shareholder resolutions of XL-Bermuda as may be required from time to time. The business to be conducted at any special general meeting must be set forth in the notice of the meeting. At least 5 days’ notice of a special general meeting must be given to shareholders of XL-Bermuda.
In the case of a special general meeting requisitioned by shareholders of XL-Bermuda, the requisition must state the purpose of the meeting, and must be signed by the requisitionists and deposited at the registered office of XL-Bermuda. If, within 21 days from the date of the deposit of the requisition, the directors do not proceed to convene a meeting (i.e. must give notice of a requisitioned meeting within 21 days, not hold the meeting within 21 days), the requisitionists, or any of them representing more than 50% of the total voting rights of all of them, may themselves convene a meeting, provided such meeting so convened is held within three months of the date of the deposit of the requisition. The three months maximum time limit within which, in such circumstances, the meeting must be held is not variable by XL-Bermuda’s bye-laws or otherwise.
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Provision
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XL-Ireland
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XL-Bermuda
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| | | XL-Ireland must, not later than 28 days from the date that it learns of this fact, convene an extraordinary general meeting of XL-Ireland’s shareholders to be held not later than 56 days from such date. This meeting must be convened for the purposes of considering whether any, and if so what, measures should be taken to address the situation. | | | | |
Record Dates for Shareholder Meetings
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| | XL-Ireland’s articles of association provide that the Board of Directors of XL-Ireland may set the record date for purposes of determining which shareholders are entitled to notice of or to vote at a general meeting and the record date must not occur before the date on which the board resolution fixing such record date is adopted. If no record date is fixed by the Board of Directors of XL-Ireland, the record date will be the day on which the notice of the meeting is mailed. | | | XL-Bermuda’s bye-laws provide that the XL-Bermuda Board may set the record date for the purposes of determining which shareholders are entitled to notice of and to vote at any general meeting. Any such record date may be on or at any time before or after the date on which notice of the meeting is sent. | |
Director Nominations
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| | Under the articles of association, shareholder’s notice must be delivered to or be mailed and received by the Secretary at XL-Ireland’s registered office not less than 90 days and not more than 120 days prior to the anniversary date of the immediately preceding annual general meeting; provided, that in the event that the annual general meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the shareholder must be received not later than the close of business 10 clear days following the day on which such notice of the date of the annual general meeting was mailed or such public disclosure of the date of the annual general meeting was made, whichever occurs first. | | | Under XL-Bermuda’s bye-laws, a shareholder’s notice must be delivered to or be mailed and received by the Secretary at XL-Bermuda’s registered office not less than 90 days and not more than 120 days prior to the anniversary date of the immediately preceding annual general meeting (the “AGM”); provided, that in the event that the AGM is called for a date that is not within 30 days before or after such anniversary date, notice by the shareholder must be received not later than the close of business on the tenth clear day following the day on which such notice of the date of the AGM was mailed or such public disclosure of the date of the AGM was made, whichever occurs first. | |
Proposals of Shareholders
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| | Under Irish law, there is no general right for a shareholder to put items on the agenda of an annual general meeting other than as set out in the articles of association of a company. The articles of association of XL-Ireland provide only for the rights of shareholders above. | | | Under Bermuda law, there are limited rights for shareholders to put items on the agenda of an annual general meeting. Please see comments in “Annual Meetings of Shareholders” above. | |
Adjournment of Shareholder
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| | XL-Ireland’s articles provide that the chairman of the meeting may with the | | | XL-Bermuda’s bye-laws provide that the chairperson of the general meeting may, | |
Provision
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XL-Ireland
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XL-Bermuda
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Meetings
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| | consent (and shall upon the direction) of the shareholders, adjourn a meeting, whether or not a quorum is present. Further, a meeting may be adjourned by the chairman of the meeting if it appears to the chairman of the meeting that the facilities at the meeting place are inadequate for persons attending the meeting to communicate simultaneously with other persons present at the meeting, have access to documents and participate in any poll required to vote on any resolutions to be decided at the meeting. No business may be transacted at any adjourned meeting other than business that might have been transacted at the meeting originally called. New notice must be given for meetings adjourned for 30 days or more. | | |
with the consent of a majority of the XL-Bermuda shareholders present in person or by proxy, or must, if so directed by XL-Bermuda shareholders holding a majority of the voting rights of those XL-Bermuda shareholders present in person or by proxy, adjourn any general meeting whether or not a quorum is present. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place of the adjourned meeting must be given to each XL-Bermuda shareholder in accordance with the provisions on special general meetings in XL-Bermuda’s bye-laws. Additionally, the chairperson of a general meeting may adjourn the meeting to another time and place without obtaining shareholder consent or direction in circumstances where it appears to the chairperson that:
(1)
it is likely to be impracticable to hold or continue that meeting because of the number of XL-Bermuda shareholders who are not present; or
(2)
the unruly conduct of persons attending the meeting prevents, or is likely to prevent, the orderly continuation of the business of the meeting; or
(3)
an adjournment is otherwise necessary so that the business of the meeting may be properly conducted.
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At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting.
Under the Bermuda Companies Act, a poll could be demanded on a question of adjournment, by (1) the chairperson of the general meeting; (2) three members present at the meeting; (3) members present at the general meeting representing at least 10% of the total voting rights; or (4) members present at the general meeting holding at least 10% of the total sum paid up on all voting shares.
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Provision
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XL-Ireland
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XL-Bermuda
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Voting
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Holders of XL-Ireland ordinary shares vote on all matters submitted to a vote of shareholders and are entitled to one vote per share, except that if, and for so long as, the votes conferred by the XL-Ireland Controlled Shares of any person constitute 10% or more of the votes conferred by the issued shares of the company, the voting rights with respect to the XL-Ireland Controlled Shares of such person will be limited, in the aggregate, to a voting power equal to approximately (but slightly less than) 10%, pursuant to a formula set forth in XL-Ireland’s articles of association.
All votes at a general meeting will be decided by way of a poll. Voting rights on a poll may be exercised by shareholders registered in XL-Ireland’s share register as of the record date for the meeting or by a duly appointed proxy of such a registered shareholder, which proxy need not be a shareholder. All proxies must be appointed in accordance with XL-Ireland’s articles of association. The articles of association of XL-Ireland provide that the Board of Directors may permit the appointment of proxies by the shareholders to be notified to XL-Ireland electronically.
In accordance with the articles of association of XL-Ireland, the Board of Directors of XL-Ireland may from time to time cause XL-Ireland to issue preference or other classes or series of shares. These shares may have such voting rights, if any, as may be specified in the terms of such shares (e.g., they may carry more votes per share than ordinary shares or may entitle their holders to a class vote on such matters as may be specified in the terms of the shares).
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Subject to the rights, if any, of the holders of any series of preferred shares, if and when issued and subject to applicable law, each holder of XL-Bermuda common shares will be entitled to one vote per share and all voting rights will be vested in those holders of record on the applicable record date on all matters voted on by the XL-Bermuda shareholders. However, if, and for so long as, the votes conferred by the XL-Bermuda Controlled Shares (as defined below) of any person constitute 10% or more of the votes conferred by the issued shares of the company, the voting rights with respect to the XL-Bermuda Controlled Shares of such person will be limited, in the aggregate, to a voting power equal to approximately (but slightly less than) 10%, pursuant to a formula set forth in XL-Bermuda’s bye-laws.
Holders of XL-Bermuda common shares will have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of directors to the XL-Bermuda Board can elect 100% of the directors to the XL-Bermuda Board and the holders of the remaining shares will not be able to elect any directors to the XL-Bermuda Board.
Shareholders decisions are generally taken by resolution at general meetings. Resolutions generally require approval by a simple majority of the votes cast at the meeting or by such higher majority as set out in the bye-laws or by statute.
Matters requiring more than a simple majority resolution as a matter of Bermuda statutory law include entering into a scheme of arrangement (75%) and removing an auditor (66 2/3%).
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| | | Treasury shares and shares of XL-Ireland held by subsidiaries of XL-Ireland do not entitle their holders to vote at general meetings of shareholders. Except where a greater majority is required by Irish law or XL-Ireland’s articles of association, any question proposed for consideration at | | | | |
Provision
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XL-Ireland
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XL-Bermuda
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any general meeting of XL-Ireland or of any class of shareholders will be decided by an ordinary resolution passed by a simple majority of the votes cast by shareholders entitled to vote at such meeting. Irish law requires “special resolutions” of the shareholders at a general meeting to approve certain matters. A special resolution of XL-Ireland requires not less than 75% of the votes cast by shareholders at a meeting of shareholders. Examples of matters requiring special resolutions include:
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Amending the objects of XL-Ireland set forth in its memorandum of association;
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Amending the articles of association of XL-Ireland;
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Approving a change of name of XL-Ireland;
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Authorizing the entering into of a guarantee or provision of security in connection with a loan, quasi-loan or credit transaction to a director or connected person of a director (which generally includes a family member or business partner of the director and any entity controlled by the director);
•
Opting out of pre-emption rights on the issuance of new shares;
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•
Re-registration of XL-Ireland from a public limited company to a private company;
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Purchase of XL-Ireland’s own shares off-market;
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Reduction of issued share capital;
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Resolving that XL-Ireland be wound up by the Irish courts;
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Resolving in favor of a shareholders’ voluntary winding-up;
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Re-designation of shares into different share classes;
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•
Setting the re-issue price of treasury shares; and
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Mergers with companies
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Provision
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XL-Ireland
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XL-Bermuda
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incorporated in the European Economic Are (as described above under “—Shareholder Approval of Business Combinations”).
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Variation of Rights Attaching to a Class or Series of Shares
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Variation of any special rights attached to any class or series of issued shares of XL-Ireland must, in accordance with the articles of association of XL-Ireland, be approved by (1) a resolution of the shareholders of the class or series affected, passed by the affirmative vote of the holders of 2/3 of the shares of that class or series voted at a meeting of that class or series or (2) the written consent of all the shareholders of that class or series. In the case of a meeting to vary the rights of any class or series of shares, Irish law provides that the necessary quorum is the presence, in person or by proxy, of at least two shareholders representing 1/3 in nominal value (or, at an adjourned meeting, at least one shareholder representing any amount of nominal value) of the relevant class.
Every shareholder of the affected class or series will have one vote for each share of such class or series that he or she holds as of the record date for the meeting except that if, and for so long as, the votes conferred by the XL-Ireland Controlled Shares of any person constitute 10% or more of the votes conferred by the issued shares of the relevant class or series, the voting rights with respect to the XL-Ireland Controlled Shares of such person will be limited, in the aggregate, to a voting power equal to approximately (but slightly less than) 10%, pursuant to a formula set forth in XL-Ireland’s articles of association.
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Under the Bermuda Companies Act, the rights attaching to any class of shares may be varied by the consent of the holders of those issued shares at such threshold as set out in the bye-laws.
Where the bye-laws are silent, the Bermuda Companies Act provides class rights may be varied by holders of 3/4 of the issued shares of that class with a quorum of two persons holding more than 1/3 of the issued shares of that class.
In addition, where the rights attaching to any class of shares are varied in accordance with the relevant bye-laws, the holders of at least 10% of the issued shares of that class could apply to the Bermuda Court to have the variation cancelled.
Variation of any special rights attached to any class or series of issued shares of XL-Bermuda must, in accordance with XL-Bermuda’s bye-laws, be approved by (i) the consent in writing of the holders of all of the issued and outstanding shares of that class; or (ii) with the sanction of a resolution passed by 2/3 of the votes cast at a separate general meeting of the shareholders of the class at which meeting the necessary quorum must be two persons at least holding or representing by proxy 1/3 of the issued shares of the class.
The rights conferred upon the shareholders of any class or series issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class or series, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
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Amendment of Governing Documents
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| | Under Irish law, XL-Ireland may alter its memorandum and articles of association by passing a special resolution of its shareholders to effect such amendment. | | |
Amendment of Memorandum of Association
Under Bermuda law, the shareholders of XL-Bermuda may amend the
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Provision
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XL-Ireland
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XL-Bermuda
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memorandum of association by a resolution approved by the affirmative vote of a majority of the votes cast on such resolution at a general meeting of XL-Bermuda. An amendment to the memorandum of association that alters a company’s business objects may require approval by the Bermuda Minister of Economic Development, who may grant or withhold approval at his or her discretion.
Amendment to Bye-laws
If Proposal Number Ten is approved by shareholders, the XL-Bermuda bye-laws will require that any amendment to the XL-Bermuda bye-laws must be approved by (a) 75% of the votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at a general meeting or (b) if the XL-Bermuda Board has unanimously approved the proposed amendment, a majority of votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at such general meeting.
If Proposal Number Ten is not approved by shareholders, the XL-Bermuda bye-laws will require that any amendment to the XL-Bermuda bye-laws must be approved by 75% of the votes cast by shareholders of XL-Bermuda present or represented by proxy and voting at such general meeting.
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Quorum Requirements
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| | Under the articles of association of XL-Ireland, the presence, in person or by proxy, of at least two shareholders constituting the holders of at least 50% of the voting power of the issued shares of XL-Ireland that carry the right to vote at the meeting constitutes a quorum for the conduct of any business at a general meeting, other than business requiring a special resolution. The quorum required to pass a special resolution at a general meeting is the presence, in person or by proxy, of at least two shareholders constituting the holders of at least 2/3 of the voting power of the issued shares of XL-Ireland that carry the right to vote at the meeting. | | |
Under XL-Bermuda’s bye-laws, the presence, in person or by proxy, of at least two shareholders constituting the holders of more than 50% of the aggregate voting power of all of the issued shares in XL-Bermuda that carry the right to vote at the meeting will constitute a quorum for all purposes; provided, that if XL-Bermuda or a class of shareholders has only one shareholder, one shareholder present in person or by proxy will constitute the necessary quorum.
Under the Bermuda Companies Act, the default quorum for meetings of a specific class of shareholders is two persons holding at least 1/3 of the issued shares of that class of shares, but this quorum may
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Provision
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XL-Ireland
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XL-Bermuda
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| | | In the case of a meeting to vary the rights of any class or series of shares, discussed above under “—Variation of Rights Attaching to a Class or Series of Shares,” Irish law provides that the necessary quorum is the presence, in person or by proxy, of at least two shareholders representing 1/3 in nominal value (or, at an adjourned meeting, at least one shareholder representing any amount of nominal value) of the relevant class. |
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be varied by the company’s bye-laws.
In the case of a meeting to vary the rights of any class or series of shares discussed above under “—Variation of Rights Attaching to a Class or Series of Shares,” Bermuda law provides that the default quorum is the presence, in person or by proxy, of at least two shareholders representing 1/3 of the issued shares of the class, but this quorum may be varied by the company’s bye-laws.
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Inspection of Books and Records
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| | Holders of shares carrying voting rights have certain rights under Irish law to inspect books and records, including the rights to: (1) receive a copy of the memorandum and articles of association of XL-Ireland and any act of the Irish Parliament which alters the memorandum of association of XL-Ireland; (2) inspect and obtain copies of the minutes of general meetings of shareholders (including resolutions adopted at such meetings); (3) inspect and receive a copy of the register of shareholders, register of directors and secretaries, register of directors’ interests and other statutory registers maintained by XL-Ireland; (4) receive copies of the most recent balance sheets and directors’ and auditors’ reports which have previously been sent to shareholders prior to an annual general meeting; and (5) receive balance sheets of any subsidiary company of XL-Ireland which have previously been sent to shareholders prior to an annual general meeting for the preceding ten years. The auditors of XL-Ireland also have the right to inspect all books and records of XL-Ireland. The auditors’ report must be circulated to the shareholders with XL-Ireland’s Financial Statements at least 21 days before the annual general meeting, and such report must be read to the shareholders at XL-Ireland’s annual general meeting. The “Financial Statements” referenced above mean XL-Ireland’s balance sheet, profit and loss account and, so far as they are not | | |
Pursuant to XL-Bermuda’s bye-laws, the XL-Bermuda Board is required to keep records of account at XL-Bermuda’s registered office for inspection by the directors. Where the records of account are held in a location outside of Bermuda, the directors are required to keep at XL-Bermuda’s office such records as will enable the directors to ascertain with reasonably accuracy the financial position of XL-Bermuda at the end of each three month period. The shareholders of XL-Bermuda have no right to inspect any accounting record or book or document of XL-Bermuda except as provided for by law or authorized by the XL-Bermuda Board.
XL-Bermuda must also keep a register of shareholders at its registered office in Bermuda for inspection and the Secretary of XL-Bermuda is required to establish and maintain a register of directors and officers for public inspection as prescribed by the Bermuda Companies Act. In addition, XL-Bermuda must file with the Bermuda Registrar of Companies a list of its directors containing, in the case of an individual director, his or her first and last name and address, or, in the case of a company acting as director, its name and registered office address. As a Bermuda company whose shares will be listed on an appointed stock exchange (i.e. the NYSE), XL-Bermuda may, in addition to its register of members at its registered office, keep one or more branch registers in a location outside of Bermuda. However, such branch register(s) must be
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Provision
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XL-Ireland
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XL-Bermuda
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| | | incorporated in the balance sheet or profit and loss account, any group accounts and the directors’ report, together with any other document required by law to be annexed to the balance sheet. | | | kept in the same manner in which the register of members in Bermuda must be kept. | |
Transfer and Registration of Shares
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XL-Ireland’s share register will be maintained by its transfer agent. Registration in this share register will be determinative of membership in XL-Ireland. A shareholder of XL-Ireland who holds shares beneficially will not be the holder of record of such shares. Instead, the depository (for example, Cede & Co., as nominee for DTC) or other nominee will be the holder of record of such shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person who will also hold such shares beneficially through the same depository or other nominee will not be registered in XL-Ireland’s official share register, as the depository or other nominee will remain the record holder of such shares.
A written instrument of transfer will be required under Irish law in order to register on XL-Ireland’s official share register any transfer of shares (1) from a person who holds such shares directly to any other person or (2) from a person who holds such shares beneficially to another person who also will hold such shares beneficially where the transfer involves a change in the depository or other nominee that is the record owner of the transferred shares. An instrument of transfer also will be required for a shareholder who directly holds shares to transfer those shares into his or her own broker account (or vice versa). Such instruments of transfer may give rise to Irish stamp duty, which must be paid prior to registration of the transfer on XL-Ireland’s official Irish share register. However, a shareholder who directly holds shares may transfer those shares into his or her own broker account (or vice versa) without giving rise to Irish stamp duty provided there is no change in the ultimate beneficial ownership of
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The XL-Bermuda share register will be maintained by its transfer agent. The XL-Bermuda Board may refuse to register a transfer unless the shares of XL-Bermuda are (i) listed on an appointed stock exchange (of which the NYSE is one) or (ii) (A) a duly executed instrument of transfer is provided to XL-Bermuda or XL-Bermuda’s transfer agent accompanied by the certificate (if any has been issued) in respect of the shares to which it relates and by such other evidence as the XL-Bermuda Board may reasonably require to show the right of the transferor to make the transfer, (B) the instrument of transfer is only in respect of one class of shares, and (C) all applicable consents, authorizations, permissions or approvals of any governmental body or agency in Bermuda or any other applicable jurisdiction have been obtained (if required).
Among other things, the XL-Bermuda Board may also decline to register a transfer of shares unless a registration statement under the Securities Act is in effect with respect to the transfer or the transfer is exempt from registration. The registration of transfers may be suspended at such times and for such periods, not exceeding 30 days in any year, as the XL-Bermuda Board may from time to time determine (except as may be required by law). Further, XL-Bermuda’s bye-laws provide that the XL-Bermuda Board must decline to register a transfer of shares if it appears to the XL-Bermuda Board that the effect of such transfer would be to increase the number of the XL-Bermuda Controlled Shares of any person to 10% or more of any class of voting shares of the total issued shares or of the voting power of the company.
If the XL-Bermuda Board refuses to register a transfer of any share, it must send to the transferee notice of the refusal within 30 days after the date on which the
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Provision
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XL-Ireland
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XL-Bermuda
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the shares as a result of the transfer or the transfer is not made in contemplation of a sale of the shares.
Among other things, the Board of Directors may also decline to register a transfer of shares unless a registration statement under the Securities Act is in effect with respect to the transfer or the transfer is exempt from registration. The registration of transfers may be suspended at such times and for such periods, not exceeding 30 days in any year, as the Board of Directors of XL-Ireland may from time to time determine (except as may be required by law). Further, the articles of association of XL-Ireland provide that the Board of Directors of XL-Ireland must decline to register a transfer of shares if it appears to the Board of Directors that the effect of such transfer would be to increase the number of the XL-Ireland Controlled Shares of any person to 10% or more of any class of voting shares of the total issued shares or of the voting power of the company.
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instrument of transfer was lodged with XL-Bermuda.
Shares listed on an appointed stock exchange, such as the NYSE, may be transferred by any means permitted by the rules of such exchange.
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Rights upon Liquidation
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| | The rights of the shareholders to a return of XL-Ireland’s assets on dissolution or winding up, following the settlement of all claims of creditors, may be prescribed in XL-Ireland’s articles of association or the terms of any shares issued by the Board of Directors of XL-Ireland from time to time. The holders of preference shares, in particular, may have the right to priority over ordinary or other shareholders in a dissolution or winding up of XL-Ireland. If the articles of association and terms of issue of the shares of the company contain no specific provisions in respect of a dissolution or winding up then, subject to the shareholder priorities and the rights of any creditors, the assets will be distributed to shareholders in proportion to the paid-up nominal value of the shares held. XL-Ireland’s articles of association provide that the shareholders of XL-Ireland are entitled to participate in a winding up, and the method by which the property will be | | | The rights of the shareholders to a return of XL-Bermuda’s assets on dissolution or winding up, following the settlement of all claims of creditors, may be prescribed in XL-Bermuda’s bye-laws or the terms of any shares issued by the Board of Directors of XL-Bermuda from time to time. The holders of preference shares, in particular, may have the right to priority over common or other shareholders in a dissolution or winding up of XL-Bermuda. | |
Provision
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XL-Ireland
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XL-Bermuda
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| | | divided shall be determined by the liquidator, subject to a special resolution by the shareholders, but such rights by ordinary shareholders to participate may be subject to the rights of any preference shareholders to participate under the terms of any series or class of preference shares. | | | | |
Enforcement of Civil Liabilities Against Foreign Persons
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A judgment for the payment of money rendered by a court in the United States based on civil liability would not be automatically enforceable in Ireland. There is no treaty between Ireland and the United States providing for the reciprocal enforcement of foreign judgments. The following requirements must be met before the foreign judgment will be deemed to be enforceable in Ireland:
•
the judgment must be for a definite sum;
•
the judgment must be final and conclusive; and
•
the judgment must be provided by a court of competent jurisdiction.
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| | The United States and Bermuda do not currently have a treaty providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not based solely on United States federal or state securities laws, would not automatically be enforceable in Bermuda. | |
| | | An Irish court will also exercise its right to refuse judgment if the foreign judgment was obtained by fraud, if the judgment violated Irish public policy, if the judgment is in breach of natural justice or if it is irreconcilable with an earlier foreign judgment. | | | | |
Name
|
| |
XL-Ireland
ordinary shares beneficially owned(1)(2) |
| |
Percent of
XL-Ireland ordinary shares |
| ||||||
Ramani Ayer(3)
|
| | | | 24,278 | | | | | | * | | |
Paul Brand(4)
|
| | | | 237,645 | | | | | | * | | |
Stephen Catlin(5)
|
| | | | 1,105,220 | | | | | | * | | |
Dale Comey(6)
|
| | | | 75,203 | | | | | | * | | |
Claus-Michael Dill
|
| | | | 2,887 | | | | | | * | | |
Robert Glauber(7)
|
| | | | 72,086 | | | | | | * | | |
Gregory Hendrick(8)
|
| | | | 627,388 | | | | | | * | | |
Edward Kelly III(9)
|
| | | | 6,776 | | | | | | * | | |
Suzanne Labarge(10)
|
| | | | 20,332 | | | | | | * | | |
Joseph Mauriello(11)
|
| | | | 64,973 | | | | | | * | | |
Michael McGavick(12)
|
| | | | 2,743,320 | | | | | | * | | |
Eugene McQuade(13)
|
| | | | 67,318 | | | | | | * | | |
Peter Porrino(14)
|
| | | | 481,538 | | | | | | * | | |
Clayton Rose(15)
|
| | | | 33,428 | | | | | | * | | |
Anne Stevens(16)
|
| | | | 9,298 | | | | | | * | | |
Sir John Vereker(17)
|
| | | | 66,015 | | | | | | * | | |
Current directors and executive officers of XL-Ireland as a group (24 persons in total)
|
| | | | 7,364,434 | | | | | | 2.59% | | |
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XL-Ireland
ordinary shares(1) |
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Name and Address of Beneficial Owner
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shares
beneficially owned |
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% of shares
beneficially owned |
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T. Rowe Price Associates, Inc. 100 E. Pratt Street, Baltimore, Maryland 21202(2) |
| | | | 28,154,196 | | | | | | 9.40% | | |
The Vanguard Group 100 Vanguard Blvd., Malvern, PA 19355(3) |
| | | | 24,516,005 | | | | | | 8.23% | | |
Franklin Mutual Advisors, LLC 101 John F. Kennedy Parkway, Short Hills, NJ 07078(4) |
| | | | 23,245,743 | | | | | | 7.80% | | |
Blackrock, Inc. 55 East 52nd Street, New York, NY 10022(5) |
| | | | 22,710,422 | | | | | | 7.60% | | |
Wellington Management Group, LLP 280 Congress Street, Boston, MA 02210(6) |
| | | | 15,029,567 | | | | | | 5.05% | | |
2014
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High
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Low
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Dividends
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First quarter
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| | | $ | 31.85 | | | | | $ | 27.79 | | | | | $ | 0.16 | | |
Second quarter
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| | | | 33.41 | | | | | | 30.54 | | | | | | 0.16 | | |
Third quarter
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| | | | 35.52 | | | | | | 31.83 | | | | | | 0.16 | | |
Fourth quarter
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| | | | 36.35 | | | | | | 30.83 | | | | | | 0.16 | | |
2015 | | | | | | | | | | | | | | | | | | | |
First quarter
|
| | | $ | 37.45 | | | | | $ | 33.98 | | | | | $ | 0.16 | | |
Second quarter
|
| | | | 38.78 | | | | | | 36.33 | | | | | | 0.16 | | |
Third quarter
|
| | | | 40.41 | | | | | | 25.56 | | | | | | 0.20 | | |
Fourth quarter
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| | | | 40.48 | | | | | | 34.44 | | | | | | 0.20 | | |
2016 | | | | | | | | | | | | | | | | | | | |
First quarter
|
| | | $ | 38.70 | | | | | $ | 33.06 | | | | | $ | 0.20 | | |
Second quarter (through May 10, 2016)
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| | | $ | 37.23 | | | | | $ | 31.92 | | | | | | — | | |
Name and Address
|
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Bermudian Status
(Yes or No) |
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Nationality
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Number of Shares
Subscribed |
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Federico Candiolo Crawford House 50 Cedar Avenue Hamilton HM 11 |
| | | | No | | | | | | Italian | | | | | | 1 | | |
Neil Horner Crawford House 50 Cedar Avenue Hamilton HM 11 |
| | | | No | | | | | | British | | | | | | 1 | | |
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/s/ Federico Candiolo
Federico Candiolo
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/s/ Neil Horner
Neil Horner
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| (Subscribers) | | | (Witnesses) | |
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Page No.
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| | | | C-5 | | | |
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| | | | C-30 | | | |
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| | | | C-30 | | | |
| | | | C-30 | | | |
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| | | | C-31 | | | |
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| | | | C-33 | | | |
| | | | C-33 | | |
| FOR VALUE RECEIVED | | |
[amount]
|
| | |||||
| | |
[transferor]
|
| | ||||||
| hereby sell assign and transfer unto | | |
[transferee]
|
| | |||||
| of | | |
[address]
|
| | |||||
| | |
[number of shares]
|
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| shares of | | |
[name of Company]
|
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| Dated | | | | | | | ||||
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(Transferor)
|
| | | | | | ||||
| In the presence of: | | | | | | | | |||
| (Witness) |
| | | | | | | | ||
| | | | | | ||||||
|
(Transferee)
|
| | | | | | | | | |
| In the presence of: | | | | | | | | | ||
| | | | | | ||||||
| (Witness) | | | | | | |
|
Description
|
| |
Proposed Date
|
|
| Record date for determining the XL Group plc shareholders eligible to vote at the shareholder meetings | | | May 10, 2016, at 5:00 p.m. (Eastern Time) and 10:00 p.m. (Irish time) | |
| Proxy statement and form of proxy first mailed to XL Group plc shareholders | | | On or about May 11, 2016 | |
| Latest time for receiving forms of proxy/voting instructions: | | | ||
| — via Internet | | | June 21, 2016, at 5:00 p.m. (Eastern Time) and 10:00 p.m. (Irish time) | |
| — via mail, courier or hand delivery | | | Any time prior to the commencement of the applicable shareholder meeting | |
| — for shareholders or holders of DDIs who hold beneficially through a broker or nominee | | | Please contact your broker or nominee for instructions | |
| — for direct holders of DDIs to provide voting instructions to Computershare UK | | | Please contact Computershare UK | |
| Special court-ordered meeting of the holders XL Group plc’s ordinary shares | | | June 23, 2016, at 10:00 a.m. (Irish time) | |
| Extraordinary general meeting of the holders of XL Group plc’s ordinary shares | | | June 23, 2016, at 10:15 a.m. (Irish time) (or as soon thereafter as possible as the special court-ordered meeting concludes or is adjourned) | |
| Court hearing to sanction the Scheme of Arrangement | | | Expected to be on July 20, 2016 | |
| Anticipated Effective Time of the Scheme of Arrangement | | | Before the opening of trading of the XL Group plc ordinary shares on the New York Stock Exchange no later than 21 days after the Scheme of Arrangement is sanctioned by the Irish High Court | |
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SIGNED by [ ]
|
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SIGNED for and on behalf of
XL GROUP LTD |
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S'C=&M4/96EV*I,S%0CE\@P+
MAS.L6"0'*BBD9U7;8Z4*1/L(5$\@9),I0!/M*'0