Cayman Islands: The Cayman "Oppression Remedy" Considered In Re-Acorn International, Inc.

Last Updated: 18 February 2016
Article by Fraser Hughes

Back in April 2009, I wrote about the changes made to the Cayman Islands' Companies Law that created a form of "oppression remedy". Such a remedy is a feature of most common law jurisdictions. It allows company shareholders to apply to court to obtain relief in circumstances where their interests are being unfairly disregarded. That relief often involves orders that regulate the affairs of the company going forward to remedy the conduct or a manner by which minority shareholders' shares may be purchased – a kind of corporate divorce.

In the Cayman Islands, the "oppression remedy" can only be obtained as alternative relief in a petition to wind up a Cayman Islands company on the just and equitable ground. The 2007 amendments to the Companies Law contain those alternative powers, set out in subsection 95(3) of the Companies Law (2013 Revision). They include powers in the nature of injunctive relief and a general power to regulate the conduct of the company's affairs in the future.

An unusual feature of the Cayman Islands "oppression" provisions is that a party seeking relief from the court must first meet the test for winding up the company (i.e. ending it as a going concern) in order to have recourse to the alternative relief (Camulos v. Kathrein [2010] 1 CILR 303). Put another way, a party seeking the "oppression remedy" relief in Cayman does not have a free standing remedy.

This creates a strange anomaly. In order to justify relief less invasive than ending the company as a going concern, a party must show that the facts justify ending the company as a going concern. This needs to be done on the basis of over 100 years of precedents that looked only to the question of whether winding up, and only winding up, was justified.

My 2009 paper on this issue speculated as to whether using the winding up principles as a type of jurisdictional trigger for granting less invasive relief could lead to either,

i) the granting of alternative relief becoming rare in the Cayman Islands; or,

ii) the various tests established to (previously) justify winding up the company would relax in terms of the nature and severity of facts required to meet the test.

A recent decision of the Honourable Mr. Justice Jones, Q.C. of 6 March 2015, in the matter of Acorn International, Inc1 ("Acorn") considered and applied s.95(3).

Acorn was a Cayman Islands company listed on the NYSE that served as a holding company for a group of businesses conducting TV direct sales business in PRC. A petition was brought by a company representing the majority shareholders (the "Majority Shareholders") and a crosspetition was brought by companies representing the minority shareholders (the "Minority Shareholders").

A peculiar aspect of the Cayman oppression remedy was brought to light immediately in the decision as,

"[b]oth petition and crosspetition necessarily plead that it would be just and equitable for the Court to make a winding up order, but both petitions ask the Court to exercise its jurisdiction under section 95(3) of the Companies Law to make orders for alternative relief."

The oppression remedy was born to (among other reasons) provide a judicial mechanism to resolve shareholder battles without liquidating a company's assets and ending it as a going concern. Where a company has going concern value, the last thing that a disgruntled shareholder might want is to realise his shares by the destruction of that going concern value – cutting the corporate baby in half.

Yet case law interpreting s.95(3) suggests that a petitioner must seek the very thing he might not want (to wind up the company) in order to seek the thing that he actually wants (an alternative to winding up the company). This forces the petitioner to argue against (some of) the very relief that he seeks in the petition.

In Acorn, the court concluded that the Minority Shareholders effectively used their control of the Board of Directors to,

i) remove a representative of the Majority Shareholders from office; and

ii) to refuse to hold an EGM in the face of a threat by the Majority Shareholders to use such a meeting to change the Board of Directors and take it away from the effective control of the Minority Shareholders. The court concluded that,

"[w]hether or not a winding up order is an appropriate remedy must depend on the basis upon which the Court comes to the conclusion that the jurisdiction is engaged. In this case the jurisdiction is engaged because the Petitioner has justifiably lost all confidence and trust in the Company's directors who have acted in bad faith and exercised their powers for the improper purpose of disenfranchising the Majority Shareholders so as to perpetuate the Minority Shareholders' control of the board. It is not necessary to make a winding up order to remedy this wrong. This complaint is capable of being remedied by an order that a meeting of the shareholders be convened for the purpose of considering and, if thought fit, passing the resolutions which Mr Roche has been attempting to put forward on behalf of the Majority Shareholders and I do not consider that the pursuit of this particular remedy is unreasonable in any way.
I have also concluded that it would be unjust in the circumstances of this case to exercise the Court's discretion by imposing upon the Petitioner (and the Majority Shareholders) a remedy which they are not seeking." (at paragraphs 71 and 72)

The Majority Shareholders might not have been seeking to wind up the company (in oral argument) but as this decision states, they were necessarily seeking to do that in their petition, because it has to be brought by a winding up petition.

As stated above, recourse to s.95(3) can only be had if one can establish that it would otherwise be just and equitable to wind up the company. Put another way, but for s.95(3), would the court have wound up the company following established principles and case law? Arguably, the answer in Acorn should have been no. It is well established that a winding up might be justified on the basis of a justifiable loss of trust and confidence in a company's directors and that loss is justifiable where there is a proven lack of probity in the conduct of the company's affairs. However, it is also established that a winding up petition should be dismissed if the petitioner has an adequate alternative remedy (Camulos v. Kathrein [2010] 1 CILR 303).

The court in Acorn concluded that the directors acted in breach of their fiduciary duties. This would normally ground a cause of action by the company, or a derivative action by its shareholder, against its directors and (on the facts in Acorn) likely justify an injunction to prevent the ongoing breaches. In addition, to the extent that the actions of the directors amounted to a breach of Acorn's articles the Majority Shareholders might well have been in a position to enjoin the breach. As succinctly stated by Justice Henderson in Russell Alternative Investments Funds Plc et al v Laurus Offshore Fund, Ltd. et al2,

"First, the articles of association constitute a contract to which all of the members of the company and the company itself must adhere. Second, the Court may restrain a company and its directors from acting in a way which violates the articles."

Since these alternatives appear to have been available, the petition might well have failed on the basis that adequate alternative remedies were available.

Ultimately, the relief granted in Acorn appears unassailably just by putting the control of the company back into the hands of the Majority Shareholders and (consistent with oppression remedy case law) the court went only so far as was necessary to remedy the oppression.

The law of the Cayman Islands in respect of the "oppression remedy" continues to evolve. As it stands now, it is said to be the case that the jurisdiction of the court to make orders pursuant to s.95(3) is only engaged if it can be shown that the court could otherwise make a winding up order. The difficulty with that state of affairs is that the body of law established to determine when a winding up order can be justified (as taken from English and other common law jurisdictions) has evolved in jurisdictions where stand-alone oppression remedies are available. Naturally, the barrier to entry is high since the result is ending the company as a going concern, and disproportionately high if the same test is being used to determine when a court can grant relief that is far short of ending a company as a going concern.

It might not be intellectually sustainable to use a test meant to determine that winding up only (and no alternative relief) is justified – and to use it to determine if alternative relief is justified. The temptation to incrementally relax the jurisdictional trigger might prove irresistible.

1 Acorn International, Inc. FSD 109 of 2014. Coram: Jones J

2 Ruling - Russell Alternative Investments Funds Plc et al v Laurus Offshore Fund, Ltd. et al Cause No.430 of 2008 18.09.08.

About the Author

Fraser Hughes (B.A., LL.B, J.D.) is a Litigation Partner with Conyers Dill & Pearman. He has particular expertise in fraud, accounting, insolvency and mutual fund-related litigation. Fraser has been involved in most of the significant hedge fund insolvency disputes in the Cayman Islands over the last seven years. Prior to joining Conyers in 2007, he was a distinguished member of the Ontario bar and has extensive trial experience, appearing as counsel in numerous high-profile insolvency and restructuring matters, including representing a key defendant in a civil conspiracy matter that turned into one of the longest civil trials in Canadian history.

Originally published in Cayman Finance Magazine, 2015-2016, Issue 2

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”

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.