The Cayman Islands Grand Court ('Grand Court') has made an Order recognising the Joint Receivers ('Receivers') of an individual segregated account of a Bermudan segregated accounts company, believed to be the first time such an Order has been made by the Grand Court in respect of receivers of a Bermudan segregated account.
What Powers did the Order Grant?
The Receivers, both of KRyS Global, represented by Solomon Harris, were granted all the functions and powers of the directors and managers of the segregated accounts company in respect of the business and assets linked to the segregated account, including the powers and functions set out in the original orders appointing the Receivers from the Bermudan Supreme Court in April and October 2017 ('the Appointment Orders'). One of the Receivers, Mat Clingerman, said :
'The recognition provides us with powers to collect information and to identify potential assets for the benefit of creditors and investors.'
What is a Segregated Account Company?
A 'segregated accounts company' ('SAC') and its 'segregated accounts' are the Bermudan equivalents of a Cayman segregated portfolio company and its segregated portfolios. A Bermudan segregated account is not a separate legal entity to its SAC. The assets held on behalf of one segregated account must be segregated from those of other segregated accounts, and may only be made available to meet the liabilities of that segregated account.
Statutory Recognition of Foreign Representatives
The Grand Court agreed that because the segregated account is not a separate legal entity to its SAC, the Receivers were not appointed to a 'debtor' and could not consequently be 'foreign representatives' under Part XVII of the Companies Law (2016 Revision). The Receivers could not therefore avail themselves of statutory recognition.
Common Law Recognition of Receivers
The Grand Court made the order recognising the Receivers by following the line of cases in which the Grand Court's jurisdiction to recognize foreign receivers is established, culminating in the Cayman Court of Appeal decision in Canadian Arab Financial Corp and Kilderkin Investments Limited v Player.
Significance of the Decision
This decision sets out a clear path for recognition in Cayman of the powers of a receiver appointed by a foreign court over an entity in a structure such as that employed in an SAC. It is therefore welcome. Whilst the decision relates to a Bermudan SAC and its segregated account, similar structures exist across many other jurisdictions, for example in the Cayman Islands, Guernsey, Delaware, British Virgin Islands, Bahamas, Anguilla, the Republic of Ireland, Mauritius, Jersey, the Isle of Man, Malta, Qatar and Gibraltar.
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