Cayman Islands: Chapter 15 Recognition: Fairfield Sentry Limited (in Liquidation)

Last Updated: 12 November 2010
Article by Ogier

As well as issuing claims in mistake and restitution in the BVI Commercial Court and the US State Supreme Court, the liquidators of Fairfield Sentry Limited ("the Fund") also petitioned for and, on 22 July 2010 obtained, Chapter 15 recognition in the United States Bankruptcy Court for the Southern District of New York. This is an interesting development and, as we understand the position from US Counsel, it means that the liquidators should now be able to seek Chapter 7 or Chapter 11 recognition with a view to bringing claw back claims against redeemed investors in the New York Bankruptcy Court pursuant to the Bankruptcy Code ("the Code"). As at the date of this article, the liquidators have yet to seek Chapter 7 or Chapter 11 recognition and no bankruptcy claims have yet been issued.

The purpose of Chapter 15 of the Code is to realise (a) co-operation between the US and foreign Courts and representatives; (b) greater legal certainty for trade and investments; (c) fair and efficient administration of estates; (d) protection and maximization of assets; and (e) facilitation of the rescue of financially troubled businesses. Chapter 15 essentially encompasses the Model Law on Cross-Border Insolvency, which was previously adopted by the United Nations Commission on International Trade Law (UNCITRAL). As an aside, although Part XVIII of the BVI Insolvency Act 2003 dealing with cross-border insolvency also seeks to enact the UNCITRAL Model Law on Cross-Border Insolvency, it has not, as yet, been brought into force. We understand from the Official Receiver, however, that the Financial Services Commission is presently in the process of reconsidering whether to enact these provisions in the near future.

A copy of the Minutes of the Proceedings of the liquidators' Chapter 15 recognition Petition can been obtained by clicking here.

The following points arising out of the Minutes of the Proceedings are of note:

1. The liquidators of the Fund sought recognition of the BVI liquidation proceedings as foreign main proceedings under section 1517(b)(1) of the Code or, in the alternative, as foreign nonmain proceedings under section 1517(b)(2) of the Code.

2. The Petition was objected to by two investors who were plaintiffs in a putative derivative action that was being brought on the Fund's behalf in the New York State Supreme Court. The main point of contention between the parties was whether the Fund's centre of main interest ("COMI") should be determined as of the date of the Petition (in which case the liquidation would be deemed to represent ongoing business activities) or, as the objectors argued, COMI should be determined with reference to the period leading up to the filing of the Petition (in which case the Court should focus only on the Fund's business activities prior to the commencement of the liquidation). Ultimately the Court found that the contentions of both parties were misplaced given that a review of the relevant factors placed the COMI in the BVI for the pre-liquidation and post-liquidation periods.

3. The US Court found, as a preliminary matter, that based on the relevant evidence, the BVI liquidation proceedings are foreign main proceedings under section 101(23) of the Code as they are "collective judicial or administrative proceeding[s] in a foreign country...under a law relating to which...the assets and affairs of the debtor are subject to control or supervision by a foreign Court for the purposes of...liquidation." The Court was persuaded that the Fund's COMI was BVI for the following reasons:

a. The Court recognised, pursuant to section 1516(c) of the Code, the importance of the Fund's place of registration in determining COMI by creating a rebuttable presumption that "[i]n the absence of evidence to the contrary, the [Fund's] registered presumed to be [its COMI]";

b. The Court was satisfied on all of the relevant evidence that the Fund effectively stopped doing business more than 18 months before the liquidators' Petition and 7 months before the BVI liquidation proceedings commenced;

c. As a result of the fact that the Fund's investment managers resigned shortly after the Madoff fraud was discovered in December 2008 and the Fund's contracts with the investment manager were severed in 2009, long before the petition was filed, the Court found that the Fund had no place of business, no management and no tangible assets located in the United States;

d. It found that the Fund's activities had, for an extended period, been conducted only in connection with the winding up of its affairs. The Court said that it was appropriate to consider this extended period in determining COMI;

e. The Court was happy that the Fund's COMI was the BVI despite the fact that Fund's assets and investors are international.

f. The Court was mindful that since the liquidation had commenced, an independent litigation committee had governed the Fund's affairs and that the committee had been comprised of non-United States-based directors, and most of its decision-making originated in the BVI.;

g. It took account of the fact that since the commencement of the BVI liquidation proceedings, the BVI-based liquidators had been directing and coordinating the Fund's affairs and that the Fund's main liquid assets were held in a BVI account;

h. It was mindful of the fact that United States citizens held less than 10% of the equity in the Fund and comprised only 17% of all of the Fund's shareholders;

i. The Court found it significant that the liquidators had BVI-resident employees and offices and had undertaken to transfer significant books and records to office space leased by the Fund in the BVI.

4. Although those objecting to the petition sought to argue that the Fund had substantial intangible assets in New York in the form of contingent and disputed litigation claims, the Court did not take account of these. It concluded that these unliquidated, contingent and disputed claims should be given no greater weight for COMI purposes than any of the Fund's other substantial claims relating to assets that are pending in Ireland and the BVI.

5. The Court was also persuaded that "the record as to the relevant period beginning December 2008, which straddles the Liquidators' appointment dates, does not support a finding of an opportunistic shift of the [Fund's] COMI or any biased activity or motivation to distort factors to establish a COMI in the BVI." The Court was happy that during this key period, the Fund's "administrative nerve centre existed in the BVI."

Based on these reasons and bearing in mind that "non-recognition where recognition is due may forestall needed inter-nation cooperation," the Court was prepared to recognise the BVI liquidation proceedings as foreign main proceedings, subject to a further review under sections 1517(d) and 1522(c) of the Code should other contrary factors come to light to indicate that a different holding is warranted. On this basis it was prepared to stay the objector's purported derivative action, as well as all actions concerning the Fund's rights and assets. It did, however, recognise and implement a stipulation that the liquidators had entered into with the BLMIS trustee's adversary proceedings against the Fund, in respect of which the Court recognised that the parties continued to engaged in good faith efforts to facilitate settlement

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions