Avoiding the Nuclear Option

The Cayman Islands Grand Court Appoints Soft Touch Provisional Liquidators to CW Group Holdings Limited

The Grand Court of the Cayman Islands (the “Court”) has appointed ‘soft touch’ provisional liquidators (“PLs”) to the Hong Kong listed company CW Group Holdings Limited (the “Company”) in a contested matter involving two competing applications for the appointment of provisional liquidators, one by the Company (the ‘soft touch’) with a view to promoting a restructuring plan, and the other by certain creditors on a traditional basis (alleging mismanagement or misconduct and the risk of dissipation of assets).

Walkers acted for the Company, as the successful applicant
In making the appointment, the Court emphasised that a key consideration in appointing PLs is to give the Company the necessary breathing space where there is a prospect of promoting a restructuring, finding that: “to allow the company to continue as a going concern and to give the board and its advisors the best possible opportunity to secure a favourable restructuring is … in the best interests of the body of general creditors as a whole.” This is an important decision, as the Court has confirmed that: (a) the appointment of PLs on a soft touch basis may be done in proceedings initiated by a “friendly” creditor, notwithstanding the objection of other creditors; (b) the relevant law does not require the applicant to have a formulated restructuring plan in advance before making an application for soft touch PLs; and (c) the appointment of PLs on a traditional basis must be “necessary” as required by the statute.

The background to the proceedings was significant because prior to the Cayman Islands application, the Company (and certain affiliates) had sought and obtained a moratorium by filing proceedings in Singapore, and a subsidiary of the Company had also had different PLs appointed in Hong Kong on a traditional basis. Notwithstanding that a stay was in effect as a matter of Singapore law, a creditor of the Company proceeded to file a winding up petition in the Cayman Islands, arguing that an injunction or stay in Singapore (which is not the place of incorporation) does not have any effect in the Cayman Islands.

 

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CAYMAN ISLANDS
Neil LuptonPartnerT +1 345 914 4286neil.lupton@walkersglobal.com
Fiona MacAdamSenior CounselT +1 345 914 4273fiona.macadam@walkersglobal.com

HONG KONG
Joanne CollettPartnerT +852 2596 3354joanne.collett@walkersglobal.com

SINGAPORE
Robert FootePartnerT +65 6603 1695robert.foote@walkersglobal.com

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