In the recent decision of In the Matter of Silicon Valley Bank (Cayman Islands Branch) FSD 163 of 2023 (DDJ), the Honourable Justice David Doyle confirmed the Grand Court\u2019s jurisdiction to make a winding-up order in respect of a foreign company.<\/p>\n
In March 2023, it was widely reported that Silicon Valley Bank Santa Clara CA (the \u201cBank\u201d) had been closed by the California Department of Financial Protection, and that the Federal Deposit Insurance Corporation had been appointed as Receiver over the Bank\u2019s assets due to its inability to pay its depositors.<\/p>\n
On 13 June 2023, a group of depositors petitioned to have the Cayman Islands branch of the Bank (the \u201cBranch\u201d) wound up on the ground that its failure to return their deposits of approximately USD6 million demonstrated its inability to pay its debts within the meaning of Section 93(c) of the Companies Act (2023 Revision) (the \u201cCompanies Act\u201d).<\/p>\n
Doyle J accepted that the Cayman Court has jurisdiction to wind up a foreign company in the Cayman Islands, pursuant to Section 91(d) of the Companies Act, in circumstances where it:<\/p>\n
The Branch had been registered as a foreign company in Cayman since 2007 and continued to be registered at the time of the hearing.<\/p>\n
The Court also accepted that the \u201cLatreefers\u201d test as applied by Collins J (as he then was) in the English decision in Re Drax Holdings Ltd 2004 W.L.R 1049 is applicable in the Cayman Islands \u2013 namely that the Court should exercise its discretion to order the winding up of a foreign company if:<\/p>\n
Doyle J held that the Court should exercise its discretion to wind up the affairs of the Branch in circumstances where:<\/p>\n
– entered into contracts governed by Cayman Law;<\/p>\n
– taken Cayman deposits; and<\/p>\n
– been regulated by the Cayman Islands Monetary Association;<\/p>\n
Accordingly, Doyle J was satisfied that he should exercise his discretion to wind up the Branch on the basis that it was unable to pay its debts. He was also persuaded that it would be just and equitable to do so in order that an investigation could be undertaken in respect of the apparent removal of the Branch\u2019s monies and assets from the Cayman Islands for the benefit of US-based depositors only.<\/p>\n
Although the Cayman Court has wound up foreign companies in the past, this was the first time that it had applied the Latreefers test. Doyle J\u2019s judgment therefore provides helpful guidance for creditors of foreign companies with connections to Cayman.<\/p>\n