Cayman Court appoints Provisional Liquidators over Segregated Portfolio Company for Restructuring purposes
In a recent judgment in the case of Re Oakwise Value Fund SPC (FSD 303 OF 2024) (IKJ), the Grand Court of the Cayman Islands has appointed Provisional Liquidators over a Cayman Islands segregated portfolio company and all three of its segregated portfolios, for both debt restructuring and corporate restructuring purposes.
The Company’s application to appoint JPLs was opposed by some of the creditors of one of the segregated portfolios. Those creditors sought to advance an argument that the Court no longer had any statutory jurisdiction to appoint Provisional Liquidators for any restructuring purposes, as a result of recent legislative changes in the Cayman Islands facilitating the appointment of Restructuring Officers over insolvent companies under Section 91B(1) of the Cayman Islands’ Companies Act.
The Court acknowledged that Section 91B, as amended, had created a “bespoke jurisdiction for insolvent restructuring which runs parallel to the winding-up regime which can only be accessed through a winding-up petition.” The Court also held, however, that section 104(3) of the Companies Act continued to enable the appointment by the Court of Provisional Liquidators, upon application by a company, if “appropriate to do so”. This broad power was not expressly circumscribed by the wording of the legislation (even as amended), and the statutory test for the appointment of Provisional Liquidators was clearly satisfied on the facts of the case.
The Court did not seek to resolve the theoretical question of whether the appointment of Provisional Liquidators would be inappropriate if the sole purpose of their appointment was purely to effect a debt restructuring of an insolvent company, which might more properly be achieved through the appointment of a Restructuring Officer. That is an issue that “must await determination in an appropriate future case”.
The judgment is also of interest in its consideration of the corporate restructuring issues that can arise in the case of a Segregated Portfolio Company that has both solvent, and insolvent, Segregated Portfolios within its corporate structure.
Alex Potts KC was instructed on behalf of the Company.
