The Supreme Court of The Bahamas has recently provided guidance on the ability and extent to which the fees and expenses of the liquidator may be paid from trust property. Such guidance has emanated from Justice Winder and Justice McKay in two separate decisions relating to Pacifico Global Advisors Limited (in liquidation) (“Pacifico”) delivered within the period of six months[1].

While the overall economic damage resulting from COVID-19 remains to be seen, one thing is certain – the pandemic has dealt a devastating blow to the global economy. Many businesses, some of which were relatively healthy pre-COVID-19, now find themselves in a liquidity crunch and at risk of insolvency.

For companies in The Bahamas facing financial distress, it is important for directors to be aware of their duties and the tools available to them, while taking steps to stabilise the company’s business.

In response to the COVID-19 pandemic, the Government of The Bahamas, like many other governments, has declared a state of public emergency. In addition, the Government has issued several Emergency Powers Orders which operate to implement a temporary shutdown of all businesses (save for those providing specific essential services) and a national curfew.

The COVID-19 pandemic is an unprecedented world health crisis which has undoubtedly caused significant disruption to the growth, function and stability of the global economy. As a result, many corporations have experienced and will continue to experience a significant reduction in their commercial activity in the near term.

In the past year, The Bahamas Supreme Court dealt with what is known to be its first case involving an insolvent trust.  This is novel area of the law in The Bahamas and other common law jurisdictions where there is no statutory regime to deal with the issue. 

The world continues to get smaller as a result of globalisation and cross-border insolvency issues are now commonplace. Whilst a debtor company may be subject to insolvency proceedings in one part of the world, its assets may be located in another. Moreover, creditors of the debtor company may be local and foreign, and therefore outside the territorial reach of the court at the seat of the insolvency.