Introduction
The
Starting point for the Court
Where proceedings have been issued in more than one common law jurisdiction but an appointment has yet to be made, the starting point for the Court in applying the principles of modified universalism should be to consider which jurisdiction is the more appropriate to assume the role of primary insolvency proceeding. The recent authorities in both
The rationale for this approach is that shareholders in and creditors of
There is also well established jurisdiction in
Recognition of foreign officeholders appointed to Cayman companies
There are also instances in which a foreign court will assume the role of primary insolvency proceeding and the Grand Court may be minded to recognise foreign office holders appointed to a
Where the Court is asked to recognise office holders appointed to a Cayman domiciled company by a foreign court, it should have regard to the following considerations, summarised by Smellie CJ In
- Whether parallel proceedings would only serve to incur additional costs and unnecessary delay3.
-
Whether reputational, regulatory or policy reasons militate in favour of a
Cayman Islands proceeding. - The breadth of powers available in each jurisdiction - of particular relevance in the context of restructuring is whether soft touch provisional liquidation is available under the foreign law4.
- Whether comparable relief has been sought in the foreign jurisdiction.
- Whether the foreign petitioner is seeking to wind up the Company or avoid the need for a winding up5.
- The locus of the Company's business.
The Chief Justice noted in Sun Cheong that one of the key questions for the Court is the purpose of the appointment in question. Where the purpose is to facilitate a restructuring or otherwise avoid the need to wind up the company the Grand Court may be more willing to grant recognition as being in the best interests of the company's stakeholders. If, however, the foreign office holders are seeking an immediate winding up which may jeopardise a potential Cayman restructuring, the Court will be slower to grant recognition.
Sun Cheong concerned an ex parte application under section 104(3) of the Companies Act (2020 Revision) for the appointment of joint provisional liquidators to
The Company was involved in the design, manufacture and sale of plastic household products and had historically been profitable, returning annual dividends to its shareholders, approximately 30% of whom were members of the public who subscribed for shares through the
The Company had, however, formulated a restructuring plan and engaged in negotiations with a potential white knight investor, whose independent financial advisors (and the proposed joint provisional liquidators) had: (i) confirmed that the proposed restructuring was realistic and commercially viable, and (ii) initiated discussions with other creditors in respect of the terms of the proposed restructuring. When the Company's application came before the Chief Justice, a winding up order was expected to be made imminently (two business days later) pursuant to one of the HK Petitions and the Grand Court was asked to appoint joint provisional liquidators in the
Accordingly, in circumstances where (i) the application before the Grand Court in Sun Cheong sought to effect a restructuring of the Company's assets and liabilities for the benefit of its stakeholders while the relief sought in the HK Petitions was an immediate winding up order, and (ii) the fact of the Company's registration in
Conclusion
The Grand Court will, in appropriate circumstances, recognise and grant assistance to liquidators of
The Chief Justice's decision in Sun Cheong provides helpful guidance as to the circumstances in which such recognition is likely to be granted and the circumstances in which shareholders, creditors and directors of Cayman companies can reasonably expect the
Footnotes
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5. In re
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Ms
Ogier
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