Cayman Islands: Commencing Proceedings Against A Company In Liquidation - Abraaj Investment Management Limited (In Official Liquidation) – [FSD 111 Of 2018 - (RMJ)]

When a Cayman Islands company is in official liquidation, no proceedings or claims can be commenced against the company without the Cayman Court's permission. This requirement serves as a safeguard for the liquidation estate of the company in liquidation from being unnecessarily depleted at the expense of stakeholders of the liquidation. It is only where a claimant has an arguable case, and the Court considers it to be fair, in the context of the liquidation as a whole, for the liquidators to have to deal with the burden of that litigation, will the Court allow litigation to be commenced against a company in liquidation.

These principles were considered in the decision of Abraaj Investment Management Limited (In Official Liquidation) - [FSD 111 of 2018 - (RMJ)]. Abraaj General Partner VIII Limited (the "GP"), in its capacity as the general partner of various funds forming part of the Abraaj Group (the "Abraaj Funds"), made an application to the Court seeking leave to commence proceedings against the former investment manager of the Abraaj Funds, ABRAAJ Investment Management Limited (In Official Liquidation) ("AIML"), for an order requiring AIML to provide information to the GP. Despite having presented an arguable and sufficiently solidly founded case for the provision of the documents to the GP, the Court denied the GP's application for permission to commence these proceedings on the basis that AIML is deeply insolvent with no resources to pay existing and approved expenses of the prior provisional liquidation or the expenses of the current liquidation. Accordingly, it concluded that it was not in the interest of the winding up of AIML for the liquidators to have to assume the burden of responding to such proceedings and that a creditor's and contributory's ability to inspect the documents of AIML provided the most prudent and constructive way forward in the circumstances.

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