Full Press Release Details
PRACTICE STATEMENT LETTER
PROPOSED SCHEME OF ARRANGEMENT IN
RESPECT OF: KINIKSA PHARMACEUTICALS, LTD.
This letter (the "Practice
Statement Letter") concerns matters which may affect your legal rights and entitlements and you may therefore wish to take appropriate
legal advice on its contents.
Purpose of this Practice Statement
Kiniksa Pharmaceuticals, Ltd. (the
"Company" or "KNSA Bermuda" and, together with its subsidiaries, "Kiniksa") is
proposing to implement a scheme of arrangement (a "Scheme") between it and its shareholders pursuant to Section 99
of the Bermuda Companies Act 1981 (as amended, the "Act"). It is anticipated that there will be a directions hearing
at 9:30am (AST) on 19 April 2024 (the "Convening Hearing") at which the Supreme Court of Bermuda (the "Court")
will be asked to give directions as to the convening of a meeting of shareholders of the Company that are eligible to vote on the Scheme.
Pursuant to Bermuda Supreme Court Circular
No. 18 of 2007 (the "Practice Statement"), prior to the Convening Hearing, any company proposing to implement
a scheme of arrangement pursuant to the Act may notify those shareholders affected by it (i) that a scheme of arrangement is being
promoted, (ii) as to the purpose that the scheme of arrangement is designed to achieve, (iii) as to the meeting(s) of shareholders
that the company believes is/are required for the purposes of voting on the scheme of arrangement and (iv) as to the constitution
of the shareholder meeting(s). This Practice Statement Letter is written pursuant to and made in accordance with the Practice Statement.
A scheme of arrangement is a formal
procedure under Section 99 of the Act, which enables a company to agree a compromise or arrangement with its shareholders or any
class of its shareholders.
Under Bermuda law, a scheme of arrangement
requires the following to occur in order to become legally binding:
In addition to the above, a Scheme will
only become effective in accordance with its terms when each condition thereto has been satisfied as set out in the Scheme.
The Purpose of the Company's
Scheme, the Proposed Redomiciliation and Reasons for it
The purpose of the Scheme is to effect
the redomiciliation of KNSA Bermuda, the parent company of the Kiniksa group, from Bermuda to the United Kingdom (the "UK")
by way of the cancellation of all issued and outstanding common shares (whatever class) of KNSA Bermuda (the "Scheme Shares")
in exchange for the issue and allotment of ordinary shares (the "Kiniksa UK Shares") in a new public limited company
to be formed under the laws of England and Wales ("Kiniksa UK") to Scheme Shareholders (as such term is defined herein).
As a result of the Scheme, Scheme Shareholders will become holders of the beneficial and/or legal title (as the case may be) to the ordinary
shares in the capital of Kiniksa UK.
Reasons for Redomiciliation
Bermuda is currently incorporated in Bermuda. KNSA Bermuda was formed in 2015 as a company incorporated under the laws of Bermuda, and
became the principal holding company of the Kiniksa group. At that time, Bermuda was chosen as a favorable jurisdiction because of its
well-developed and understood legal system and a favorable tax environment. Bermuda was selected over other jurisdictions affording similar
attributes in part owing to its proximity to the U.S. and the U.S. public equity market's comfort level with Bermuda companies.
The Company's presence in the UK dates back to 2018, when Kiniksa Pharmaceuticals (UK), Ltd. was formed as a wholly-owned subsidiary
of KNSA Bermuda. KNSA Bermuda went public in 2018, and its Class A common shares ("Class A Shares") are listed
and trade on the Nasdaq Global Select Market ("Nasdaq").
Kiniksa has decided that Bermuda is
no longer the most desirable jurisdiction for our principal holding company's place of incorporation for several reasons. Global
tax initiatives of the Organization for Economic Co-Operation and Development ("OECD") and recent tax law changes in
Bermuda have the potential to materially adversely affect our company. Additionally, legislative and regulatory proposals in jurisdictions
in which Kiniksa operates could be detrimental to companies that are domiciled in Bermuda. If ultimately enacted, these proposals could
have a material and adverse impact on the Company and our shareholders.
Kiniksa has reviewed a number of alternative
jurisdictions with our Board of Directors and outside advisers, including the U.S., where our parent company has never been incorporated
or a tax resident. A move to the U.S. was rejected because it would significantly increase the Company's global effective tax rate,
resulting in significant declines in future earnings. Such a move would also incur an adverse tax impact on our shareholders. Kiniksa
determined instead that moving the principal holding company of the group from Bermuda to a country with a more expansive tax treaty with
the U.S. would be in the best interests of shareholders, employees and other stakeholders, and Kiniksa believes that moving the place
of incorporation and tax residence of the group's principal holding company to the UK in this manner is the best available option.
The UK offers a stable long-term legal and regulatory environment for Kiniksa. In reaching this decision Kiniksa considered the following
Identity of Scheme Shareholders
The term "Scheme Shareholders"
means, with respect to the common shares of KNSA Bermuda the holders of Class A Shares, Class A1 common shares ("Class A1
Shares"), Class B common shares ("Class B Shares") and Class B1 common shares ("Class B1
Shares") and are collectively referred to herein as the "KNSA Bermuda Shares".
In accordance with the Directions Order,
Scheme Shareholders as of the close of business on the record date to be set by the Board of Directors of KNSA Bermuda will be entitled
to notice of and to attend the Scheme Meeting. At the date of this Practice Statement Letter, we anticipate that the record date will
be on or around 15 April 2024.
Scheme Meeting: Classes for Voting
Under the provisions of Section 99
of the Act, in order for a scheme to become legally binding on a company and all of its relevant scheme shareholders, the scheme must
be approved by a majority in number of each class of shareholders, representing at least 75% in value of such class, present and voting
either in person or by proxy at the relevant Scheme Meeting. As noted above, the scheme must then be sanctioned by the Court at a subsequent
Sanction Hearing, a copy of the Sanction Order delivered to the Bermuda Registrar of Companies and all conditions precedent to the scheme's
effectiveness satisfied (or waived) before it can become effective. If, and from the date upon which, a scheme becomes effective in accordance
with its terms, all of the scheme shareholders (irrespective of whether or not they voted, or voted in favour of the scheme), along with
the company, will be bound by the terms of the scheme.
It is the responsibility of the company
proposing a scheme to formulate the class or classes of shareholders for the purpose of convening a meeting of its shareholders to consider
and, if thought fit, approve the scheme. The final decision as to class composition will be a matter for the Court after taking into account
any objections from any Scheme Shareholders.
The test for determining whether shareholders
can be placed in the same class is whether the rights of the shareholders affected by the scheme are so different or would be affected
so differently by the proposed scheme as to make it impossible for them to consult together with a view to their common interests. If
it is impossible to consult together with a view to their common interests, shareholders must be divided into separate classes for purposes
of voting on the proposed scheme and a separate meeting must be held for each class of shareholders to cast their vote.
One single class of shareholder at
the Scheme Meeting of the Company
The Company has determined that the
rights of all Scheme Shareholders will be effected in the same manner and therefore it is possible for all Scheme Shareholders to consult
with a view to their common interests. Accordingly, the Company proposes that all Scheme Shareholders holding Scheme Shares (whatever
class) will vote as one single class of shareholders at one scheme meeting. The Scheme Shareholders entitled to vote will have one vote
per KNSA Bermuda Share (regardless of the class of common share such Scheme Shareholder holds) at the Scheme Meeting.
Conditions to Effectiveness of the
The Scheme has conditions to its effectiveness
and such conditions will be set out in full in the Scheme of Arrangement attached to the Proxy Statement of KNSA Bermuda. The Scheme's
conditions include, among other things, the following:
At the Effective Time, in consideration
of the rights of the Scheme Shareholders under this Scheme:
If the Scheme is approved at the Scheme
Meeting, the Company will petition the Court to sanction the Scheme. If the Court sanctions the Scheme, the Scheme will become effective
upon (i) the satisfaction or waiver of the conditions to the Scheme and (ii) the filing of the Sanction Order with the Registrar