Whilst the wishes of the majority of creditors (whether in number or by value) is an important factor in many decisions made within insolvency processes, it is important to note that the Court retains a discretion in winding-up proceedings as to whether or not a company should be placed into liquidation.

This can be exercised even when a vast majority of unsecured creditors both in number and by value oppose the appointment of liquidators.

In the recent BVI decision, Krios Holdings Pte Limited v Shefford Investments Holding Limited (BVIHC (Com) 0131/2015), the Court did exactly that in refusing to dismiss or adjourn a winding-up petition.

In his judgment, Mr Justice Bannister confirmed that the exercise of the Court's discretion whether to make, or else to dismiss or adjourn, an order appointing liquidators does not necessarily depend on the wishes of the majority of creditors, even when a vast majority of unsecured creditors both in number and by value oppose the appointment of liquidators.


In that case, the respondent debtor company, Shefford Investments Holding Limited (Shefford), was a BVI holding company with no underlying business, its sole assets being shares in a Singapore joint venture company, the major asset of which was a petrochemical processing plant. Shefford had guaranteed payment and performance by its 100 per cent parent company under a Put and Call Option Agreement entered into between its parent company and the petitioning creditor, Krios Holdings Pte Ltd. The parent company failed to perform its obligations under the Put Option, and owed the petitioning creditor US$40 million. When the parent company failed to make payment of the first tranche of US$10 million as it fell due, the petitioning creditor subsequently served a demand under the guarantee on Shefford. No payment was forthcoming. A statutory demand was subsequently served on Shefford, requiring payment of the debt within 21 days. No payment was forthcoming and no application to set aside the statutory demand was made. The petitioning creditor subsequently made an application for appointment of liquidators.

In the week before the first hearing date Notices of Opposition were served by Shefford, and half a dozen other companies, including its parent company, claiming to be unsecured creditors in a total sum of approximately US$185 million.

Shefford was proposing a reorganisation in Singapore instead of the appointment of liquidators in BVI, and, shortly after service of the statutory demand and shortly after the application to appoint liquidators was served; Shefford applied to the Singapore High Court and obtained a moratorium to facilitate reorganisation. From the papers filed in the case it appeared that, although Shefford was proposing a debt-for-equity swap in Singapore there was a real potential that, if the Singapore reorganisation was to go ahead, the remaining unsecured creditors might find themselves bound to accept dividends of only 0.5¢ in the dollar.

Consideration of Re Demaglass Holdings Ltd

In determining whether to exercise its discretion to adjourn the application, as requested in the majorities creditors' Notices of Opposition, to allow for the restructuring to proceed in Singapore, Mr Justice Bannister had express regard to the judgment of Lord Neuberger, in Re Demaglass Holding Ltd [2001] 2 BCLC 633. In that case, the English High Court had recognised that: "the exercise of the court's discretion will not normally be dependent on mathematical niceties" and "the fact that the majority of creditors in value support the making of a winding-up order is not necessarily decisive on the issue in every case."

Mr Justice Bannister stated that the exercise of the Court's discretion cannot be decided simply on the basis of the number of creditors opposing the making of the order and the quantum of the debt they are owed and that it is not merely "a head counting exercise".

In refusing an adjournment and making an immediate order for the appointment of liquidators, the judge also had regard to the fact that the opposition from the majority creditors appeared to be part of an "orchestrated effort" and made the judge question whether – without deciding – all the creditors were legitimate.


The judgment therefore provides clear BVI authority that, even where the debtor company and the vast majority of creditors – even those representing over 90 per cent by value of the company's debts – are opposed to the making of a winding-up order, this will not prevent the Court from exercising its discretion to appoint a liquidator to a clearly insolvent company.

The robust decision of the BVI Court is consistent with the stance it has recently taken with respect to insolvent companies relying on arbitral clauses to avoid insolvency, as highlighted at: http://www.harneys.com/files/arbitration-agreements.pdf.

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.