A Little More Time: The BVI Court Clarifies When And How It Will Exercise Its Discretion To Adjourn An Application To Appoint Liquidators

• Published date: 13 November 2023
• Subject Matter: Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy
• Law Firm: Walkers
• Author: Mr Murray Laing, Luke Petith and Cate Barbour

This article first appeared in Volume 20, Issue 5 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - www.chasecambria.com.

Synopsis

Emerging from the COVID-19 pandemic, inflationary pressures and increasing interest rates have continued to have a negative impact on the global economy. This has caused a significant increase in the number of creditor applications seeking to appoint liquidators over BVI companies on the basis that they are unable to pay their debts as they fall due.

It is well-settled that if a creditor wants to have a company wound up, and the court is satisfied that the company is unable to pay its debts, an order for the appointment of liquidators will follow unless there is some special reason why it should not. The case law principally addresses whether companies should be put into liquidation or not (and in most cases, the focus is one whether or not there is a genuine dispute as to whether the debt is due and payable), but there is little authority as to the intermediate question of adjournment where a debtor is working to pay an undisputed debt and requires a further period of time in which to do so.

The Court has a discretion to adjourn the hearing of an application for an order appointing liquidators.¹ That discretion is an unfettered one ² but the burden to show why the order appointing liquidators should not be made³ rests on the company.

A recent (unreported) BVI decision has given a welcome insight into the factors that the Court will consider in exercising its discretion to adjourn the hearing of an application to appoint liquidators, including the impact on other creditors.

The application to appoint liquidators

The BVI company in question (the 'Company') holds a significant interest, through subsidiaries, in the development of a maritime port and storage facility on Egypt's Red Sea coast, a substantial infrastructure project of significant strategic economic importance in Egypt. The creditor is an investor in one of the subsidiaries of the Company which indirectly holds the majority shareholding in the port project. The parties agreed some years ago that the creditor would exit its investment, but there were disagreements about the interpretation of the exit provisions which led to the dispute being resolved by arbitration. In May 2022 the arbitral tribunal made an award in favour of the creditor.

Whilst the Company was able to make interim payments in part satisfaction of...