Stuart Cullen and Benjamin Drakes, Dentons LLP

This is an extract from the 2023 edition of GRR's the Americas Restructuring Review. The whole publication is available here.

In summary

In the recent decision of Evergreen International Holdings Limited, delivered on 11 January 2022, the Grand Court of the Cayman Islands made an order for the immediate winding up of a company notwithstanding the company’s cross-applications for an adjournment of the winding up petition and the appointment of “light-touch” provisional liquidators for restructuring purposes. The Court dismissed the company’s cross-applications on the basis that there was no credible evidence which supported the company’s assertion that a viable restructuring was imminent. 

Appointing provisional liquidators is a powerful tool, but one which often has a serious impact on the commercial operations and business reputation of a company, and so is not a step to be taken lightly. This article examines recent judicial trends in the Cayman Islands regarding the appointment of provisional liquidators, and in particular, in relation to the balance of justice that needs to be weighed as between a petitioner and the company.

In Ctrip Investment Holding Ltd v eHi Car Services Limited the Cayman Islands Court delivered a warning to shareholders seeking to use the winding up jurisdiction to advance their own individual commercial interests.

In three recent decisions the courts have examined the limits on a liquidator’s ability to obtain court orders compelling third parties to provide documents held by them, as well as deciding on the recoverability of costs incurred by third parties complying with production orders that are made against them.

The Court of Appeal has recently clarified that if a foreign company, being a shareholder of a Cayman Islands company, issues a winding up petition against that company and there is evidence that the petitioning company will be unable to pay an adverse costs order if the respondent is successful at trial, then the Cayman Islands court has an inherent jurisdiction to order the petitioning foreign company to provide security for the respondent's costs – Re Dyxnet Holdings¹.

Introduction

Introduction

In the recent judgment of In the Matter of Margara Shipping Limited (the “Margara Decision”)1 the Cayman Islands Grand Court provided some useful guidance on the basis on which a company can be restored to the Register of Companies (the “Register”) and subsequently wound up pursuant to section 159 of the Companies Act (2021 Revision) (the “Companies Act”) and the Grand Court Rules (2022 Consolidation) (“GCR”), Order 102, Rule 18.

The Legal Basis to Restore and Wind Up A Company

The Cayman Islands' legislature has recently gazetted the Companies (Amendment) Bill, 2021 (the Amendment Bill), proposing the introduction of a new corporate restructuring process and the concept of a dedicated 'restructuring officer' into the Cayman Islands Companies Act (2021 Revision). Under the Amendment Bill, the filing of a petition for the appointment of a restructuring officer would trigger an automatic global moratorium on claims against the company, giving it the opportunity to seek to implement a restructuring.

In the recent decision of Aurora Funds Management Limited et al -v- Torchlight GP Limited1 the Cayman Islands Court of Appeal dismissed an appeal brought in respect of an order made by McMillan J in the Grand Court validating certain payments made by Torchlight GP Limited (the "General Partner") in accordance with Section 99 of the Companies Law.

Background