Cayman Islands: Court Of Appeal Guidance On Just And Equitable Winding Up Petitions

The recent judgment of the Cayman Islands Court of Appeal ("CICA") in Asia Pacific Limited v ARC Capital LLC1 explains the approach that the Court will take when considering an application to strike-out a contributory's just and equitable winding up petition which is based on an offer to purchase the petitioner's shares at fair value. 

The decision also confirms the principles that the Court will apply when awarding indemnity costs where it is argued that a party has conducted proceedings improperly, unreasonably or negligently.  


Trikona Advisors Ltd ("Trikona") was a Cayman Islands company which acted as investment advisor to an investment fund, Trinity Capital Plc.  

Both the ultimate beneficial ownership and management of Trikona were split 50/50 between two individuals, or members of their families, Aashish Kalra and Rakshitt Chugh.  Mr Kalra and Mr Chugh were both directors of Trikona and each had nominated one further director to the board.  However the Court found that Trikona's affairs were managed solely by Mr Kalra and Mr Chugh and that the other two directors took no part in the company's management. 

In the proceedings before the Grand Court, it was common ground that Trikona should be regarded as what is known as a "quasi-partnership" company. The Privy Council has described quasi-partnership companies as "[c]ompanies where the parties possess rights, expectations and obligations which are not submerged in the company structure". The Court went on to note that a feature of such companies is that "the legal, corporate and employment relationships do not tell the whole story... behind them there is a relationship of trust and confidence similar to that obtaining between partners, which makes it unjust or inequitable for the majority to insist on its strict legal rights. 

In 2008 and 2009 a number of disputes arose, and the Judge found that by the end of 2009, the relationship between Mr Kalra and Mr Chugh had broken down.  In December 2011 one of the registered shareholders through which Mr Kalra held his beneficial interest in Trikona ("Asia Pacific") commenced proceedings in Connecticut against Mr Chugh alleging breaches of fiduciary duty.  Asia Pacific alleged that Mr Chugh had sabotaged Trikona and had stolen assets from the company and it sought damages of US$210 million. 

Shortly after the commencement of the Connecticut proceedings, the director of Trikona nominated by Mr Chugh resigned and Mr Kalra and the director that he had nominated then signed a written resolution removing Mr Chugh as a director. 

In February 2012, the two registered shareholders through which Mr Chugh held his beneficial interest in Trikona (the "Petitioners") commenced winding up proceedings in respect of Trikona in the Cayman Islands pursuant to the Court's just and equitable winding up jurisdiction, relying principally on Mr Chugh's removal as a director.  The Petitioners argued that, as Trikona was a quasi-partnership, there was a legitimate expectation that Mr Chugh would participate in its management and that there had been a breakdown in trust and confidence between the parties. 

After the commencement of the winding up proceedings, Asia Pacific made an offer to purchase the Petitioners' shares in Trikona and applied to have the winding up petition struck-out as an abuse of process.  Pursuant to section 95(3) of the Cayman Islands Companies Law, on hearing a contributory's winding up petition on just and equitable grounds, the Court has jurisdiction to grant the petitioner certain relief as an alternative to a winding up order.  This includes an order that the petitioner's shares be purchased by another shareholder.  

The mechanism for determining the fair value of the shares in the offer from Asia Pacific purported to comply with the principles approved by the House of Lords in O'Neill v Phillips.4   However both the Grand Court and the CICA found, for slightly different reasons, that the offer did not comply with the principles set down in that case and in the CVC case referred to in footnote 3 above.  

After dismissing the strike-out application, the Grand Court proceeded to hear the trial of the petition and made a winding up order against Trikona.  The Judge made strong adverse findings against Mr Kalra, including that he was a wholly unreliable witness and that the allegations made by Asia Pacific in the Connecticut proceedings were "a thoroughly dishonest abuse of process".  The Grand Court ordered that Asia Pacific pay the Petitioners' costs of the proceedings on the indemnity basis. 


There were three grounds of appeal pursued by Asia Pacific, each of which was dismissed by the CICA.  Two of the grounds turned on the application of orthodox principles relating to the very limited scope for the CICA to overturn the trial Judge's findings of fact, where the findings are based on the Judge's assessment of the witnesses' oral evidence given at the trial. 

The more noteworthy part of the judgment concerns Asia Pacific's argument that the Judge had erred in failing to dismiss the petition on the basis that its buy-out offer provided the Petitioners with an adequate alternative remedy which they were acting unreasonably in not pursuing. 

The CICA began its discussion of this issue by noting that, when making a buy-out order under section 95(3) of the Companies Law, the Court does not dismiss the winding up petition, it allows the petition.  The gateway to the granting of alternative relief (i.e. the buy-out order) pursuant to section 95(3) is that the Court is satisfied that the petitioner has made out a case for a winding up order. 

The CICA went on to hold that the Judge was wrong to apply the analysis set out in Camulos Partners Offshore Limited v Kathrein and Company in a "buy-out offer" case.  In Camulos, the Court struck-out a winding up petition on the grounds that the petitioner had an adequate alternative remedy, in the form of an ordinary writ action by which it could obtain the relief that it wanted (namely payment of its redemption claim and orders restraining payments to other investors but not to it) and the petitioner was trying to exert improper pressure on the company by pursuing winding up proceedings to procure leverage.  The reasoning in Camulos does not apply to the petition in the Asia Pacific case because, where a petitioner's objective is to obtain a winding up order or a buy-out order under section 95(3), the winding up petition is the appropriate route. 

The CICA recognised that a petitioner which rejects a buy-out offer at fair value for its shares should normally expect to have its petition dismissed.  However that is not because of the existence of an alternative remedy, but because if, at the stage of an application to strike-out the petition before trial, the Court is satisfied that the likely outcome of the petition will be that the Court will allow the petition and will determine that the order most favourable to the petitioner will be a buy-out order on the terms already offered to the petitioner, the continued pursuit of the petition will be an abuse of process. 

The CICA went on to state that, in a quasi-partnership case (at least where the petitioner is a 50% shareholder), it is not necessarily unreasonable for the petitioner to refuse a buy-out offer: 

"Why should [a 50% shareholder] not take the view that an equitable solution to the breakdown in the relationship of trust and confidence upon which the quasi partnership was established would be for him to have the opportunity to purchase the other party's 50% share; or for the company should be sold to a third party; or for the company to be wound up?  And why should he not take the view that, if agreement cannot be reached as to an equitable solution, he would prefer to await the judgment of the court after a trial rather than to be forced to agree to a solution which he sees as inequitable?

In dismissing the appeal against the indemnity costs order, the CICA approved the approach followed by the Grand Court in Al Sadik v Investcorp Bank BSC.6    In determining whether a party had conducted proceedings "improperly, unreasonably or negligently"7,so as to justify an order for indemnity costs, a distinction has to be drawn between a party who advances an honest case, but who fails because the Court finds their evidence to be incredible or untruthful, and a party who advances a case which they know to be false.  Only in the latter case can the Court make an order for indemnity costs. 

The CICA cautioned against acceding too readily to a strike-out application in these circumstances.  Striking out a winding up petition without hearing all the evidence, simply because of the existence of an offer to buy the petitioner's shares risked pre-judging the substantive issues: 

"It may be that, in the light of the analysis contained in the judgment of this Court as to the proper approach to an application to strike out a contributory's winding up petition in circumstances where the petitioner is a 50% shareholder, future strike out applications in such cases will be regarded as made unreasonably...". 

It remains to be seen how the courts will interpret and apply these comments, and the comments referred to above that a 50% shareholder is not necessarily acting unreasonably in refusing a buy-out offer, in future cases.  In particular, it remains to be seen whether the approach in this case is followed in all just and equitable winding up proceedings where the company in question is a quasi-partnership, or whether it will be confined to situations where the company is a quasi-partnership and the petitioner is a 50% shareholder. 


1. Unreported, CICA, 22 April 2015. 

2. Although there was a dispute in the Grand Court proceedings as to the identity of the parties to the quasi-partnership.  In the appeal proceedings, the Appellant unsuccessfully sought to change its position to argue that the Judge was wrong to find that Trikona was a quasi-partnership between Mr Kalra and Mr Chugh.

3. CVC/Opportunity Equity Partners Ltd v Demarco Almedia [2002] CILR 77 at [34] per Lord Millett.

4. [1999] 1 WLR 1092.

5. [2010] 1 CILR 303.

6. [2012] (2) CILR 33.

7. Within the meaning of Order 62, Rule 4(11) of the Grand Court Rules.

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.

Events from this Firm
28 Apr 2016, Webinar, George Town, Cayman Islands

A topical discussion on recent updates covering some of the more frequently asked questions around FATCA and CRS.

29 Jun 2016, Webinar, George Town, Cayman Islands

This webcast focuses on the impact FATCA and CRS are having on structured finance vehicles set up in the BVI, Cayman Islands and Ireland and covers in detail the impending reporting and notification deadlines in each of these jurisdictions.

11 Aug 2016, Webinar, George Town, Cayman Islands

Our panel of experts will reflect on the impact of LLCs in the month since the first available registration date and discuss why the LLC was introduced and how it can be used to help our clients.

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”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.