Bermuda: Insolvency Petitions Down In Most Offshore Jurisdictions In 2015

Last Updated: 23 May 2016
Article by Tony Heaver-Wren

Most Read Contributor in Bermuda, May 2019

OVERVIEW- THE GLOBAL PICTURE

WINDING-UP PETITIONS

In total, across the six offshore jurisdictions analysed, there were 211 winding-up petitions filed during 2015, and 113 orders were made as a result. The number of filings was therefore slightly up on the 202 recorded in 2014, and the number of orders reported so far, down on the 120 we have identified from last year.

With the exception of the Cayman Islands and Mauritius, the volume of filings in 2015 represented a drop-off in the number of insolvency petition filings across most offshore jurisdictions, relative to the previous year. The Isle of Man, the British Virgin Islands (BVI) and Bermuda all saw a slight decrease in court filings, while the increase of 59% in Cayman, and 5% in Mauritius, led to an overall jump of 4% across the jurisdictions analysed.

WINDING UP PETITIONS TOTALS, 2015

Placing the overall filings in the wider context of statistics for recent years, the broadly flat figures recorded for 2015 across the surveyed jurisdictions as a whole reflect a continuing levelling off in the number of filings since the high-point of 2013, and before that, the years immediately following the 2008 global financial crisis. In that wider context, to some degree the figures reflect positive changes in global macroeconomic conditions over the course of 2015, however as the insolvency petition filing statistics in the Cayman Islands (and early indications of 2016 filings) suggest, this overall trend of dwindling petition filings is not anticipated to continue.

WINDING UP PETITIONS

The United Kingdom

In order to provide some context and comparison to our offshore numbers, we have also tracked petitions recorded in the United Kingdom. During 2014 – the latest year for which comprehensive figures are available – the Royal Courts of Justice for England & Wales recorded 5,503 filings and 2,942 orders, which calculates as a 53% conversion rate. In addition, the UK Insolvency Service publishes a more up to date total of all compulsory company liquidations across the whole of the UK (although not the number of petitions filed beforehand), and in 2015, there were 3,679 compulsory UK company liquidation orders, a 20% drop from 2014.

As a percentage of the company registry, insolvency petitions made up 0.29% of the UK registry in 2014. With the exception of Mauritius, this is considerably higher than any offshore jurisdiction, with most of them well below 0.10%. Partly this can be put down to the UK having a much larger population and the increased presence of active trading companies, as opposed to holding companies or companies used for tax efficient structuring. It is also true that the absence in most offshore jurisdictions of a government-funded official receiver often means that companies with no assets simply cease to be active and will be administratively struck from the register, rather than formally wound up.

The United States of America

The general downward trend in petition filings in the surveyed jurisdictions also reflected trends seen in the United States of America (USA) in 2015, where a double-digit drop was recorded in bankruptcy court petitions published by the Administrative Office of the US Courts. Business petitions fell 12% to 24,985 in 2015, part of a continuing downward trend, with the number of 2015 filings half the level of the annual total being reported just five years earlier.

RATES OF CONVERSION

In reviewing all the different types of petitions in 2015 we witnessed something of a divergence in the conversion rate among offshore jurisdictions. In 2014, the majority of the surveyed offshore jurisdictions saw an average conversion rate of petitions filed to orders made of around 60%, but a year later the picture is more complex. In 2015, the conversion rate ranges from 100% in the Isle of Man, where a low base of just five filings all converted to orders in 2015, down to 13% in Mauritius, where 113 filings led to just 15 orders. The three other major offshore centres of Bermuda, the BVI and the Cayman Islands were more consistent in their conversion rates, all settling at around 70%.

Mauritius is clearly the biggest outlier, but late delivery of data in that jurisdiction is likely to be a factor. Using 2013 and 2014 as a guide, we can expect the conversion rate in Mauritius to be closer to one third following adjustment for this lag in reporting. The BVI conversion rate came off its 2014 79% high, with a 63% conversation rate recorded in 2015.

SPEED OF CONVERSION

During 2015, the average time between the date a petition was submitted and the date a court order was made was six weeks.

Bermuda was the jurisdiction in which winding up orders were made the quickest, with an average of just four weeks to conversion, while the Isle of Man tended to take the longest, with an average response time of nine weeks.

The Cayman Islands produced by far the most court orders in 2015, with 52 as against second-ranked BVI, and still managed an average turnaround time of five weeks, placing it behind only Bermuda in terms of conversion time.

ANALYSIS OF 2015 FILINGS BY JURISDICTION

BERMUDA

During the course of 2015, Bermuda witnessed 20 winding up petitions, which converted into 15 orders. The number of petitions was therefore down 13% compared to the 23 petitions recorded in 2014, though still up on the 18 filings seen in 2013. Last year Bermuda was the only jurisdiction to show an increase in petitions, when compared to 2013. The conversion rate for Bermuda has significantly increased since 2013, with three out of four petitions converted in each of the last two years, as against a conversion rate of just 44% in 2013.

In 2015, the number of weeks between an initial application being submitted and a court order being made averaged at just four, making the jurisdiction the most efficient of those included in our survey when it comes to conversion times.

Schemes of Arrangement

In addition to winding up petitions, there were also three schemes of arrangement ordered by the Bermudian Court during the course of 2015, as compared to six that were ordered during 2014. All three schemes were solvent schemes of arrangement. In contrast to previous years when the scheme of arrangement process was used exclusively to re-domicile Bermuda companies to another jurisdiction, 2015 saw both inward and outward re-domestication of business.

BERMUDA - IN OUR VIEW

In 2015 the Bermuda Supreme Court saw a moderate increase in fund-related filings and orders, largely attributable to the conclusion of legacy litigation commenced during the financial crisis. Otherwise, there was a downturn in orders made in respect of local companies, potentially attributable to a moderate stabilisation in local economic conditions. It is notable in this regard that the majority of petition filings that did not result in orders were made in respect of local companies. The trend of filings in relation to Hong Kong-listed Bermuda companies with assets in the People's Republic of China continued but at a significantly reduced rate, with only a single such petition filed during the course of the year. The conversion rate of filings to orders remained constant, with three quarters of filings resulting in an order. This is due to the fact the Court Registry typically assigns a first hearing date about four weeks after the initial filing (although this can be substantially reduced in special circumstances). If the petition is unopposed a winding up order is granted on the first hearing date unless an adjournment of the petition is granted to explore the viability of a scheme of arrangement. Accordingly, the continued high conversion rate may also be indicative of a higher number of uncontested petitions.

To continue reading this article, please click here

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
 
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
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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

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