Bermuda: Creditors, Comity and Corporate Rescue

Bermuda Court Appoints Light-touch Provisional Liquidators to North Mining Shares Company Limited

On 1 November 2019, the Supreme Court of Bermuda appointed provisional liquidators to North Mining Shares Company Limited, a company incorporated in Bermuda and listed in Hong Kong (“North Mining”). The provisional liquidators were appointed on a ‘light touch’ basis and ‘for restructuring purposes only’, in circumstances where creditor action in Hong Kong was threatening the company’s survival. This latest ruling on Bermuda’s ‘light-touch’ jurisdiction shows the extent to which the Bermuda and Hong Kong courts will work together to facilitate the restructuring of companies experiencing short term liquidity issues. The ruling is available here: In the matter of North Mining Shares Company Limited [2020] SC (Bda) 7 Com.

Background
North Mining was incorporated in Bermuda in 1995 and subsequently listed on the Hong Kong Stock Exchange. Together with its subsidiaries, it carried on a successful business for many years, operating in the molybdenum mining, property management, security technology and chemical manufacturing sectors.

During the course of 2018 and 2019, challenging market conditions were reflected in poorer-than-expected financial results. Cashflow tightened. Management sought to dispose of certain non-core business units so as to focus on the company’s primary business of mining and property management. A purchaser for these business units was found and the proposed transaction was documented.

Before the transaction could be completed, an unpaid creditor petitioned for the winding-up of North Mining in Hong Kong. The company was in a difficult position; although it was unquestionably solvent on a balance sheet basis, cashflow was tight and there was a real risk of a winding-up order being made in Hong Kong before the proposed asset sales could be completed so as to permit the petitioning creditor to be paid. North Mining needed more time to restructure its financial affairs and continue on as a profitable going concern.

 

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