{"id":7330,"date":"2022-01-13T09:14:08","date_gmt":"2022-01-13T14:14:08","guid":{"rendered":"https:\/\/www.campbellslegal.com\/?p=7330"},"modified":"2022-01-13T09:38:32","modified_gmt":"2022-01-13T14:38:32","slug":"cayman-islands-the-importance-of-the-laws-of-a-companys-place-of-incorporation-in-cross-border-insolvency-proceedings","status":"publish","type":"post","link":"https:\/\/www.campbellslegal.com\/client-advisory\/cayman-islands-the-importance-of-the-laws-of-a-companys-place-of-incorporation-in-cross-border-insolvency-proceedings-7330\/","title":{"rendered":"Cayman Islands: the importance of the laws of a company\u2019s place of incorporation in cross-border insolvency proceedings"},"content":{"rendered":"

Since the landmark decision in Lamtex<\/em>[<\/a>1]<\/a>early last year in Hong Kong, there has been a flurry of Hong Kong cases in which the Hong Kong Court has wound up a debtor company (incorporated offshore), despite \u201clight-touch\u201d provisional liquidators being appointed to those companies for restructuring purposes in the place of incorporation.<\/p>\n

Until Lamtex<\/em>, the position in Hong Kong (at least for the last 10 years or so) was largely (but not entirely) one of deference to the place of a company\u2019s incorporation and to recognise and assist provisional liquidators appointed in those jurisdictions to try to facilitate the restructuring of those companies.<\/p>\n

In Lamtex<\/em>, and the cases that followed in Hong Kong[2]<\/a>, the Companies Court shifted its focus from place of incorporation to the location of a company\u2019s centre of main interests (COMI) in determining the insolvency process that should be given primacy. In doing so, it has also limited the circumstances in which it will grant (and in some instances has refused to grant) recognition and assistance to \u201clight-touch\u201d provisional liquidators, particularly where the appointment is being used in what Justice Harris has described as \u201cletterbox\u201d jurisdictions as a tactic to oppose a Hong Kong winding up petition.<\/p>\n

The main concerns identified by Justice Harris in these decisions can be summarised as follows: (i) if the company\u2019s COMI is somewhere other than the place of incorporation, regard is to be had to other factors to determine which jurisdiction should be the primary one to conduct an insolvency process, including creditors\u2019 views; (ii) a Company should have a credible plan to restructure its debt if an adjournment to a winding up petition presented in Hong Kong is to be considered; and (iii) the Company should have creditor support for any proposed restructuring.<\/p>\n

The Cayman Court recently considered these issues in the decision of Silver Base Group Holdings<\/em>[3]<\/a>, <\/em>wherein Justice Doyle emphasised the importance of the laws of a company\u2019s place of incorporation on all matters concerning the company\u2019s existence and the international recognition of light-touch provisional liquidators appointed by the Cayman Court for restructuring purposes. Justice Doyle said he endeavoured to communicate his message about similar cases with connections in both jurisdictions to the Hong Kong Court through the judgment.<\/p>\n

Silver Base<\/strong><\/h3>\n

Silver Base Group Holdings Limited (the \u201cCompany<\/strong>\u201d) is an investment holding company incorporated under the laws of the Cayman Islands.\u00a0 Its shares are listed on the Hong Kong Stock Exchange and its main business (the distribution of liquor and cigarette products) is conducted through its subsidiaries in Hong Kong and elsewhere within the People\u2019s Republic of China.<\/p>\n

Throughout 2021, several of the Company\u2019s bondholders made demands against the Company seeking repayment of outstanding bonds the Company had issued. In October 2021, two winding up petitions were filed against the Company with the Hong Kong Court relating to the unpaid bonds (the \u201cHong Kong Proceedings<\/strong>\u201d). The Company then presented a petition for its own winding up to the Cayman Court on 17 November 2021 in circumstances where, inter alia<\/em>, it accepted that the amounts owed to various of its bondholders were due and owing and the Company was currently unable to pay these (and other) debts. On the same day, the Company filed with the Cayman Court an application for the appointment of joint provisional liquidators for restructuring purposes (the \u201cPL Application<\/strong>\u201d).<\/p>\n

The Cayman Court initially adjourned the petition and PL Application due to a concern over the lack of notice to creditors and comity concerns in respect of the Hong Kong Proceedings. In particular:<\/p>\n