Most Read Contributor in British Virgin Islands, March 2017
The Bermuda Commercial Court has provided guidance as to the
considerations it will take into account when deciding the identity
of the JPLs, further to
our article on the Up Energy Group Ltd (the
Company) restructuring and the
circumstances in which Joint Provisional Liquidators
(JPLs) will be appointed to monitor the
proposed restructuring of a Bermuda company listed on the Hong Kong
When the case was last before the Court, Chief Justice Kawaley
ordered that Bermuda JPLs be appointed to monitor the proposed
restructuring but adjourned the issue as to the identity of the
JPLs. At the hearing on the identity issue, the arguments revolved
around whether or not RSM Corporate Advisory (Hong Kong) Limited
(RSM), a firm of restructuring
consultants which had been working with the Company for some time,
could or should be appointed as JPLs. The petitioning creditor
sought the appointment of wholly independent JPLs who, it was
argued, were better qualified.
In a ruling handed down in November, Chief Justice Kawaley
reiterated from his first ruling that the purpose of appointing
JPLs in a 'debtor in possession' style restructuring is
two-fold: it provides efficiency to the restructuring and it
provides creditors and the Court with confidence in the
He further added that in a situation such as the present one,
where there are genuine conflicts of interest between different
creditor factions, the need to give confidence to creditors is
particularly important but that it did not extinguish genuine
concerns regarding the efficiency of the restructuring.
The Chief Justice noted that it is typically the case that when
a company is pursuing an insolvent restructuring, it will seek the
appointment of JPLs of its own choosing. He described the situation
in which JPLs are forced upon a company's management against
its wishes as akin to a 'shotgun marriage', and held that
it was important to appoint JPLs that could win the confidence of
both the creditors and the Company.
On that basis and adopting a pragmatic approach, the Chief
Justice prioritised the Company's desire to work with RSM, and
the cost and value of the work already undertaken by RSM, over any
consideration that the JPLs nominated by the petitioning creditor
were arguably more qualified – citing a 'real risk of
The commercial approach of the Chief Justice strikes a balance
between the company's wishes, creditor protection, and driving
cost efficiencies into the restructuring process. However, it
cannot be ignored that such a pragmatic attitude is not in step
with all other offshore jurisdictions.
In the Cayman Islands, unlike Bermuda, there is a statutory
requirement that a liquidator must be regarded as independent as
regards the company. This requirement of 'independence' has
been construed strictly by the Grand Court of the Cayman Islands
and it is not sufficient for a nominated liquidator to simply
consider himself free from conflicts of interest. There must be an
objective perception of independence (see In re Hadar Fund
Ltd, Unreported, 13 August 2013, Jones J). In applying this
principle, in In re Bay Capital Asia Fund Ltd, Unreported,
1 October 2015, Smellie CJ, it was held that a firm of accountants
which had recently provided advisory services to the company
including restructuring advice were not independent and therefore
were unable to be appointed as liquidators to the company. It can
fairly be surmised that if the Up Energy Group Ltd factual matrix
had been presented to the Grand Court of the Cayman Islands, a
different result would have ensued and RSM would not have been
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