The Court of Appeal (CICA) has provided further clarification and guidance to Cayman Islands insolvency professionals on issues ranging from voidable transactions, the scope of liquidators’ powers and legal professional privilege, following the publication this month of a number of decisions that had come before the Court during the November 2016 Court sitting. Set out below is a summary of the Court’s findings in 3 of the CICA decisions which may be relevant to your day to day practice.
Voidable Transactions
In CHC Group Ltd ("CHC") the Cayman Islands Grand Court has determined that, in certain circumstances, directors of a company can commence Cayman Islands restructuring provisional liquidation proceedings ("RPL Proceedings") without the need for a shareholders' resolution or authorisation in the company's articles of association. This decision allows greater access by companies to the Cayman Islands restructuring regime by confirming a practical solution to the so-called Emmadart issue.
Key Points
- A trust can be created and enforceable in respect of assets sited in a jurisdiction that does not recognise the concept of a trust
- In circumstances where the owner of a beneficial right goes into liquidation, the transfer of legal rights held by a third party to a bonafide purchaser for value is not a disposition within the meaning of s127.
The Facts
CAYMAN ISLANDS
The Court interpreted the terms of a Termination Agreement and found that the Applicant, Europa, was entitled to €1.3 million from the Defendant, AII, in relation to funds invested on Europa's behalf, which had been paid out and held by AII. As a matter of construction, it could not have been intended that AII should be left with sums owing to an investor following a Termination Agreement.
In a "jurisprudentially unattractive" decision, the Supreme Court of the Commonwealth of the Bahamas has refused the liquidators of Caledonian Bank (in official liquidation under the supervision of the Grand Court of the Cayman Islands) recognition in the Bahamas, where assets in the region of $16 million are held.
Facts
Introduction
In a recent judgment,[1] the Cayman Islands Court of Appeal (the “Court”) has upheld the decision of the Grand Court which found that investors who have redeemed their shares but remain unpaid at the commencement of a company’s liquidation are entitled to prove in the liquidation for their redemption proceeds as a creditor. This is the case irrespective of whether or not the company could lawfully have distributed the redemption proceeds to them prior to the commencement of the liquidation.
The Grand Court of the Cayman Islands has held that depositor protection provisions in Cayman Islands law only apply in respect of depositors with deposits of CI$20,000 (US$24,400) or less.1 Depositors with more than CI$20,000 on deposit do not benefit from such provisions at all, even for their first CI$20,000. This means that, for persuasive policy reasons, the position in the Cayman Islands differs from the position in the EU under the deposit guarantee scheme.
In Vento and Others v Westminster Hope & Turnberry, Ltd (unreported, 25 November 2015) The Honourable Anthony Smellie, C.J., sitting in the Financial Services Division of the Grand Court clarified the grounds on which judgment creditors may seek to use charging orders to enforce judgment debts. Readers will note that typically charging orders are made in respect of immoveable property (eg.