British Virgin Islands: Liquidator Strikes Gold As BVI Mining Company Returns To Solvency

Last Updated: 14 June 2017
Article by Benjamin Clarke

A British Virgin Islands court has sanctioned a liquidator's application for a blended fee remuneration, including a percentage of revenue from assets sold, after she returned an ailing gold mining company to solvency in "a remarkable success story".

Sitting in the Commercial Division of the BVI High Court of Justice on 11 May, Justice Roger Kaye QC reportedly told the liquidator – Charlotte Caulfield of KRyS Global – that it was only the second time he had seen an insolvent company returned to solvency in his 45 years of practice.

In the oral ruling, described briefly in a press release by KRyS Global, the court approved the company's exit from winding-up proceedings and noted that it had been returned to shareholders with creditors paid in full.

BVI-registered Taurus was the parent company to a host of subsidiaries that had mining exploration licences and permits in West Africa. The original winding-up order was issued against it in October 2016, after the company experienced a series of cashflow problems.

Speaking to GRR, Caulfield says that, at the time of her appointment by the BVI court, operations on the ground in West Africa had reached an advanced stage, with local employees in place and equipment purchased.

"When I was appointed I didn't have any realisable assets or any funding in hand, and the shareholders were unable to provide funding," Caulfield explains. In order to settle the debts owed to creditors and local employees she undertook a sales process, auctioning off some of Taurus' immediate subsidiaries and their assets.

Completing the sales processes over a number of months, without the aid of an industry broker, Caulfield was able to recoup more than enough to pay Taurus' creditors in full, before going to court for final approval.

"The original appointment order issued by the court was drafted in an old-fashioned way, so I needed the court's permission to pay the creditors in full," says Caulfield, explaining that generally, over the last few years, BVI orders have not required the liquidator to obtain court sanction to pay creditors in full. "I'd already paid 99 cents on the dollar but I needed permission to pay the final tranche of the interest."

At the hearing to approve the company's exit from bankruptcy on 11 May, Caulfield's application included a request for a blended fee remuneration under section 432 of the BVI's Insolvency Act 2003, allowing her to recover her own fees through a combination of time clocked at an hourly rate, plus a percentage of the realised assets – the first known application of its kind in the BVI, according to KRyS Global.

Caulfield told the court she had taken a "significant risk" in accepting the appointment without any funding in place and undertaking a complex sale of assets in multiple jurisdictions – a task she would have outsourced to an industry broker if there was appropriate funding in place.

She also told the court that she had been "efficient" and "effective" in realising the assets, providing Justice Kaye with examples of fees sourced from brokers in the mining industry, which amounted to more than she was claiming.

"I had taken on the role myself, so it was only reasonable that I should get a percentage of the realised assets," as the industry broker would have done, she tells GRR.

Approving this reasoning, Justice Kaye sanctioned the application and praised the work of Caulfield, and her counsel, Rosalind Nicholson of Walkers Global, describing the matter as a "remarkable success story", according to KRyS Global's press release.

Ordering the liquidation to be terminated under section 233 of the Insolvency Act, the court awarded Caulfield costs as claimed, comprising 50% of the time clocked up at an hourly rate, plus 5% of the revenue from the assets sold.

Justice Kaye also said the residual assets should be returned to Taurus so that its shareholders – now in control of the company again – could decide what to do with them.

Nicholson tells GRR that "Walkers was very pleased to be able to work with the liquidator throughout the liquidation of Taurus Gold and to assist her in securing an excellent outcome for creditors and the return of the company to solvency."

"We were particularly pleased to have represented the liquidator on her successful application under section 432(4) of the Insolvency Act on which, for the first time, the BVI Commercial Court has been prepared to fix a liquidator's remuneration by reference, in part, to the value of the assets realised," she adds.

Although this was the first known application of its kind under the Insolvency Act, Caulfield says it is not the first time BVI courts have shown a willingness to "consider remuneration and payments to their office holders consistent with the risk they are bearing in certain appointments."

Highlighting the case of Fairfield Sentry – a BVI-based investment fund that was among the biggest investors in the Bernie Madoff Ponzi scheme – Caulfield explains that a BVI court permitted the liquidators to pay 80% of their fees in advance of court approval.

The flexibility of the courts "will allow liquidators like myself greater certainty in assuming reasonable risk where there may not be easily available assets to monetise in the short-run," Caulfield adds.

Established in December 2010, Taurus Gold had planned to conduct exploratory and gold mining activities in West Africa through subsidiaries with operations centred in Côte d'Ivoire, Burkina Faso and Mali.

Although there are a couple of subsidiaries remaining in West Africa, Caulfield says she believes these have effectively ceased trading due to a lack of funding.

Representatives of Taurus Gold did not respond to GRR's request for comment.

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.

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