No Crying Over Spilt Milk

In Re China Shanshui Cement Group Limited (23 November 2015) Mangatal J, sitting in the Financial Services Division of the Grand Court of the Cayman Islands, has held that the decision of Jones J in Re China Milk Products Group Ltd.1 was wrong, thereby confirming a long-held belief universally shared among Cayman Islands' practitioners.

The question at issue was whether or not directors of a Cayman Islands company had the authority to present a winding up petition on behalf of the company in the absence of either (a) a shareholders resolution or (b) an express provision in the articles of association authorising such action to be taken by the directors.

Mangatal J held that as a matter of Cayman Islands law they did not have such authority. She held that the law was correctly stated by Smellie J (as he then was) in Banco Economico SA v Allied Leasing and Finance Corporation2, applying the well-known English decision in Re Emmadart Ltd.3 which was reversed by statute in England4, but had not been reversed by statute in the Cayman Islands. There had been debate as to this very point in the discussions leading to the 2007 amendments to the Companies Law, but Mangatal J concluded that a deliberate decision had been taken not to reverse Re Emmadart by statute in the Cayman Islands.

In short, she held that section 94(2) of the Companies Law which provides that "where expressly provided for in the articles of association of a company the directors of the company incorporated after the commencement of this Law have authority to present a winding up petition on its behalf without the sanction of a resolution passed at a general meeting" applied to both solvent and insolvent companies (and not just to solvent companies as Jones J had decided). It merely provided statutory confirmation of the position which had...