Cayman Islands: When Can A Company Apply For Its Own Winding Up In The Cayman Islands?

Last Updated: 2 December 2015
Article by Oliver Payne

A recent decision of the Grand Court of the Cayman Islands has considered the ability of a company to apply for its own winding up. Construing s.94(1)(a) of the Companies Law (2013 Revision) (the "Law"), the Court upheld the pre-2011 view that while a company acts through its directors, those directors have no authority to present a winding up petition absent: (a) a resolution of the shareholders of the company resolving that the company present a winding up petition; or (b) an express provision in the articles of association of the company authorising the directors to present a winding up petition on behalf of the company - a general provision giving the directors all of the powers of management of the company is insufficient. 

Facts

In the Matter of China Shanshui Cement Group Limited, unreported, 25 November 2015, Mangatal J. dismissed a winding up petition presented in the Grand Court of the Cayman Islands by the board of directors of China Shanshui Cement Group Limited (the "Company") on the basis of alleged cash flow insolvency (the "Petition"). Contemporaneously with the Petition, the board made an ex parte on notice application, purportedly on behalf of the Company, to appoint restructuring joint provisional liquidators (the "JPLs") under section 104(3) of the Law (the "Application").

The Petition and the Application were filed on 10 November 2015 without obtaining a resolution of the Company's shareholders. As per the requirements of the Stock Exchange of Hong Kong (the "SEHK"), the Company filed an announcement of the filing of the Applications with the SEHK.  That announcement was made in Hong Kong on 11 November 2015, a matter of hours before the Application was listed for an ex parte hearing before the Court.

Following submissions made on behalf of, inter alios, two shareholders of the Company, who together held over 53% of the Company's shares, Tianrui (International) Holding Company Limited and China Shanshui Investment Company Limited (together, the "Majority Shareholders"), the Court ruled that the matter was not so urgent that interested shareholders and creditors of the Company should be deprived of proper notice and a period of time to consider their positions, including whether they wished to be heard on the Application.  The Application was adjourned for an inter partes hearing on 18 November 2015, with subsequent hearings taking place on 19 and 23 November 2015, with increasing numbers of creditors being represented at each hearing.

The Majority Shareholders opposed the Application on numerous substantive grounds, but as a preliminary issue, sought determination of the question of whether the directors had standing to file the Petition (the existence of which underpinned the Application).

Decision

In her 34 page written judgment, Mangatal J. sets out a thorough analysis of the standing requirement to petition under s.94(1)(a) of the Law, both before and after the changes in the 2007 Companies  (Amendment), Law came into effect.

Mangatal J. ruled that as s.94(1) of the Law derived from equivalent provisions contained in English company statutes, and as the 2007 Amendments did not make any change of substance to s.94(1) of the Law, then the traditional common law position - which was considered in detail by Brightman J (as he then was) in the English case of Re Emmadart Ltd [1979] 1 Ch. 540, and followed by Smellie J (as he then was) in the Cayman case of Banco Economico SA v Allied Leasing and Finance Corporation [1998] CILR 102 - continued to apply in Cayman.  In short, this means that directors of companies have no authority to present a winding up petition absent: (a) a resolution of the shareholders of the company resolving that the company present a winding up petition; or (b) an express provision in the articles of association of the company authorising the directors to present a winding up petition on behalf of the company.

In reaching that decision, Mangatal J. carefully analysed the decision In The matter of China Milk Products Group Limited [2011] 2 CILR 61.  In that case, Jones J. concluded that, having regard to the overall amendments made to the Companies Law in 2007 and certain matters of policy, it was necessary to distinguish between solvent and insolvent companies when construing s.94(1)(a) of the Law to determine who could petition to wind up a company.  Whereas Jones J. took the view that directors of a (cash flow) insolvent company or a company of doubtful insolvency had standing to petition to wind up in the name of the company without the sanction of the shareholders or an express provision in the articles of association, it was only directors of solvent companies who required an authorising shareholder resolution or an express provision in the articles of association in order to present a petition in the name of the company.

While accepting that Jones J.'s construction may well have allowed the Court to reach the best commercial result in the circumstances of China Milk, Mangatal J., was convinced that Jones J.'s construction of the statutory provisions was wrong and felt obliged to differ.  Mangatal J. noted that the language of the relevant provision of the statute drew no distinction on solvency grounds and the existence of amendments to other provisions of the Law in 2007 did not assist in interpreting what are, in her view, the same clear and unambiguous words in s.94(1)(a).  Accordingly, Mangatal J. held that the traditional common law position set out in Emmadart and applied in Banco Economico prevails in Cayman.

This decision marks a return to the pre-2011 position with regard to s.94(1)(a) and therefore is of general relevance to restructuring and insolvency practitioners. Furthermore, it will be of particular relevance to directors of all Cayman companies who are considering the possibility of presenting a petition to wind up a company and any related application to appoint joint provisional liquidators under s.104(3) of the Law.  Directors must ensure that they obtain appropriate shareholder resolutions or are mandated under the relevant articles of the company irrespective of the solvency (or otherwise) of the company before presenting a winding up petition in the Cayman Islands on behalf of a company.

Ogier acted for Tianrui (International) Holding Company Limited, one of the successful applicants seeking determination of the preliminary issue.

Oliver Payne of Ogier appeared for Tianrui (International) Holding Company Limited at the ex parte hearing, on notice, of the application to appoint joint provisional liquidators.

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 Mondaq.com.

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
Conyers Dill & Pearman
 
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
 
Similar Articles
Relevancy Powered by MondaqAI
Conyers Dill & Pearman
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must 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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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