Paradise, Poison Pills and Panic at the AGM: 1Globe Capital LLC v Sinovac Biotech Ltd.

Remember Sinovac Biotech Ltd (“Sinovac”)? They were one of the first pharma-companies to develop a Covid vaccine during the pandemic. But a few years before that breakthrough, the company faced a very different challenge.

On 16 January 2025, the Privy Council gave its judgment in 1Globe Capital LLC v Sinovac Biotech Ltd (Antigua and Barbuda) [2025] UKPC 3.

Background

Sinovac is incorporated in Antigua, operates in China, and is listed on the NASDAQ. The appellant, 1Globe Capital LLC (“1Globe”), was one of Sinovac’s 3,330 shareholders at the relevant time.

During the course of 2016 and 2017, Sinovac received competing takeover bids from two consortia: the “Management Consortium”, which included Sinovac’s incumbent directors (the “Incumbent Directors”), and the “Sinobioway Consortium”. 1Globe supported the Sinobioway Consortium. Matters came to a head at Sinovac’s AGM on 6 February 2018 (the “AGM”).

Sinovac’s by-laws provided that its directors were to be re-appointed at each AGM. This motion was duly included in the notice calling the AGM. However, at the AGM itself, a new motion was proposed to replace the Incumbent Directors with new directors (the “New Directors”). It is supposed that supporters of the Management Consortium would have voted to re-appoint the Incumbent Directors, and supporters of the Sinobioway Consortium would have voted to replace the incumbents, and appoint the New Directors.

In the event, the New Directors received the majority of the votes at the AGM (the “Dissenting Votes”), but the results were not declared pending receipt of legal advice by the Company on the validity of the Dissenting Votes. A month later, the Incumbent Directors announced their re-election. At the same time, they issued a claim in Delaware against 1Globe and the other shareholders who had voted for the New Directors, on the basis that a “poison pill” rights agreement governed by Delaware law had been entered into by Sinovac before the AGM, which impacted upon shareholder voting rights (effectively diluting the Dissenting Votes). 1Globe issued a claim in Antigua in response.  

By the time the Antiguan case reached the Privy Council, three main issues fell to be decided. 

Decision

1. The “AGM issue”

Sinovac’s case was that the nomination of the New Directors was an ambush; the Incumbent Directors had not been given the opportunity to respond to the new motion, and so it fell foul of “requirements for basic fairness and transparency”. 1Globe argued that the election of directors was ordinary business, which did not require prior notice under Antiguan law or Sinovac’s constitution.  

Agreeing with 1Globe, the Privy Council held that the election of directors at an AGM was indeed ordinary business and, therefore, a motion to replace and appoint new directors could be made at Sinovac’s AGM without prior notice. The starting point for determining what was fair or unfair was “the bargain between the company and the shareholders, and between the shareholders [themselves]”, i.e. Sinovac’s constitution in the context of applicable statutes (in this case the International Business Corporations Act of Antigua (“IBCA”)). 

Section 109(1) of the IBCA provides that all business at an AGM is special business, except (amongst other things) the election of directors. This was mirrored in Sinovac’s by-laws. The notice convening the AGM circulated by Sinovac stated that the re-election of the Incumbent Directors and “such other business as may properly may be brought” would be brought. As such, the motion proposed at the AGM was lawful, and did not contravene any requirement for basic fairness and transparency.

2. The “Rights Agreement Issue”

The Incumbent Directors had caused Sinovac to adopt a “poison pill” rights agreement. This agreement was intended to ward off hostile takeovers by giving shareholders, other than the hostile party, the right to acquire more shares in the target company.

Sinovac argued that a trigger event had occurred under the rights agreement, meaning that the Dissenting Votes at the AGM were diluted. 1Globe argued that the rights agreement was invalid because it added rights in respect of Sinovac’s shares, which under the provisions of the IBCA required shareholder consent by way of special resolution, and not simply by board resolution.

The Privy Council held that the rights agreement did indeed add rights for the purposes of the IBCA (and not merely grant options for shares, as argued by Sinovac) and was, therefore, invalid.

3. The “Discretion Issue”

Having found in favour of 1Globe on the above points, the final question for the Privy Council was whether to re-exercise the court’s discretion on relief and, if so, how.

The Privy Council seemed somewhat perplexed that Sinovac had not simply sought to adjourn the AGM at the time (which might have given the Incumbent Directors an opportunity to properly argue against the Dissenting Votes) and that neither party had subsequently sought a remedy which would allow the AGM to be re-run. The Privy Council perceived that both sides were “going for broke”, seeking a declaration that the votes cast at the AGM were either valid or invalid, despite the fact that other modes of redress could have been sought in the proceedings.

Faced with only a binary choice between the declarations sought, the Privy Council declared “however unwillingly” that the New Directors were validly elected at the AGM.

Comment

This case will of course be of interest to Antiguan lawyers, companies and shareholders, but there are also three important lessons for all common law jurisdictions.

First, the warning that shareholders in companies like Sinovac, which are a very long way from being quasi-partnerships, must look to their bargain with the company and other shareholders when seeking to assert their rights. Appeals to wider equitable concepts of “fairness and transparency” will fall flat if ultimately inconsistent with the company’s constitution. The Court will not step in to impose different standards or new requirements just because one party feels they have had a rough ride. 

Second, litigants must avoid becoming blinkered by framing their objectives as binary choices. For example, the Privy Council noted that those present at the AGM appeared to adopt positions prepared for them by their lawyers, without exercising independent judgment. In particular, no-one thought to simply adjourn the AGM. This was compounded by a failure to seek alternative remedies before the local court that might have allowed a fresh AGM to be called to consider the position anew, with shareholders availed of all the relevant information.  

Finally, it demonstrates the important role lawyers play in identifying the causes of action and issues in dispute. The Privy Council refers variously to the fact that this appeal turned as much on what was not before it. It plainly felt important issues, and perhaps more appropriate remedies, should have been before it, but were not.  

FURTHER INFORMATION 

If you have any questions regarding this blog, please contact Sophie Evans in our Dispute Resolution team.

About the author 

Sophie is a Senior Associate in the Dispute Resolution Team. Her experience covers a broad range of commercial disputes, with a particular focus on shareholder and director disputes, civil fraud and breaches of contract.