Cayman Court Supports Practical Approach To Adjudication Of Debts In Liquidation

Published date24 March 2022
Subject MatterFinance and Banking, Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Debt Capital Markets, Financial Services, Corporate and Company Law, Insolvency/Bankruptcy
Law FirmOgier
AuthorMs Max Galt

How should liquidators deal with the administrative burden of adjudicating thousands of low-value proof of debts in a liquidation estate, without exhausting the limited assets available in the liquidation estate? The Grand Court recently sanctioned a pragmatic solution.

Introduction

Premier Assurance Group SPC Ltd (in official liquidation) (the Company), an exempted segregated portfolio company, was placed into controllership on 29 September 2020, 1 and then subsequently into liquidation on 27 October 2020 with Jeffrey Stower and Jason Robinson of KPMG appointed as joint liquidators (the JOLs). One of the segregated portfolios of the company, the Premier Assurance Segregated Portfolio, had offered life assurance portfolios to 11,160 participants (the Participants), all of whom had a claim in the liquidation. In circumstances where it was not practical to manually adjudicate 11,160 proofs of debt, an application was brought to sanction an alternative means of adjudicating the debts in a cost-effective manner. 2

Background

Information concerning the status of the insurance policies issued to the Participants was derived from the Company's database and was sufficient to determine the account value of each policy held by a Participant.

Accordingly, the JOLs proposed to (a) admit to proof the claims of the Participants in respect of the amounts recorded as due to them in the SVRs and without requiring them to lodge proofs of debt; (b) to send to each Participant a notice of admission informing the Participant that his or her proof had been admitted (the Draft Notices); and (c) afford each Participant the opportunity to dispute the amount admitted to proof within 21 days.

The JOLs estimated that the streamlined method proposed would achieve a cost saving to the insolvent estate in the region of US$2.6 million and allow the adjudication process to be completed within a much shorter time frame.

The Companies Act (2021 Revision)

In order to obtain the order sanctioning the alternative process proposed by the liquidators, the JOLs applied to the Grand Court for authorisation to do so under section 110(2)(a) of the Companies Act (2021 Revision) (the Companies Act). Under that provision, the Court has wide powers to determine questions referred to it by a liquidator "in any way relating to or affecting the assets or the winding up of the company".

The Court considered previous cases, such as in Re Centaur Litigation SPC in which the Court (a) had sanctioned an...

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