Soft Touch Provisional Liquidators in the BVI: Constellation Overseas Ltd, Pointing the Way

In December 2018, the BVI Commercial Court appointed ‘soft touch’ provisional liquidators to Constellation Overseas Ltd, a BVI incorporated company, and five of its BVI incorporated subsidiaries (the Companies’).Although the practice of appointing provisional liquidators to facilitate cross-border restructuring is well established elsewhere, this was the first occasion on which the BVI Court had made such an Order.

Prior to the Constellation decision, there had been a respectable body of practitioner opinion which held that the unique features of the BVI Insolvency Act 2003 (the ‘BVI Act’) excluded any jurisdiction to appoint provisional liquidators in such circumstances. Although the question as to the existence of the jurisdiction may have been answered in the Constellation decision, questions remain as to the limits of that jurisdiction and the circumstances in which the Court will consider it appropriate to exercise its discretion in favour of an appointment where the purpose is a restructuring. This article seeks to explore these questions and to propose answers to at least some of them. 

As a starting point, we look at the factual backgroundagainst which the applications in Constellation were made and the procedural factors material to the Court’s decision in that case. Against that factual background, we then turn to the legal framework within which the Court reached its decision in Constellation and seek to highlight how the Court dealt with certain legal points which arose in the case and which may arise in future cases on different facts. Lastly, we tentatively suggest some general conclusions which may be drawn from the case.

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This article first appeared in Volume 16, Issue 4 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - 

Rosalind NicholsonPartnerT +1 284 852

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