Practising Modified Universalism In The Cayman Islands: From China Agrotech To Sun Cheong

• Published date: 08 March 2021
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Corporate and Company Law, Insolvency/Bankruptcy, Shareholders
• Law Firm: Ogier
• Author: Ms Gemma Lardner

Introduction

The Cayman Islands and Hong Kong courts have both provided useful directions in recent months as to the manner in which the courts in the respective jurisdictions will manage cross-border applications to restructure Cayman Islands companies, consistent with the principles of international comity and modified universalism.

Starting point for the Court

Where proceedings have been issued in more than one common law jurisdiction but an appointment has yet to be made, the starting point for the Court in applying the principles of modified universalism should be to consider which jurisdiction is the more appropriate to assume the role of primary insolvency proceeding. The recent authorities in both Hong Kong and the Cayman Islands confirm that, consistent with longstanding authority, this will ordinarily be assumed to be the place of incorporation of the company, being the place that its investors, service providers and creditors would typically associate with, among other things, the company's registered office and the law governing the duties of its board of directors and its Articles of Association.

The rationale for this approach is that shareholders in and creditors of Cayman Islands companies may have a "reasonable expectation that the courts here are competent and able to resolve any complex dispute that may arise in an efficient and just manner"¹. The Cayman Islands are also an advanced and reputable international financial centre which frequently deals with international disputes involving Cayman Islands companies² so there can be no suggestion that the Cayman Court is not competent to deal with insolvency and restructuring applications and disputes if and when they arise.

There is also well established jurisdiction in Hong Kong to recognise and assist foreign officeholders appointed in the country of incorporation of the company. The Hong Kong Court has recently recognised Cayman appointed restructuring provisional liquidators in, inter alia, China Oil Gangran Energy Group Holdings Limited (in Provisional Liquidation) [2020] HKCFI 825 and Moody Technology Holdings Limited (in Provisional Liquidation) [2020] 4 HKC 78, although it has made clear in a judgment citing the Cayman decision in Sun Cheong that the mere appointment of provisional liquidators in the Cayman Islands does not, without more, automatically operate to stay ongoing winding up proceedings in Hong Kong (see Re FDG Electric Vehicles Limited [2020] HKCFI 2931).

Recognition of...