Provisional Liquidation In Bermuda And The Selection Of Provisional Liquidators

• Published date: 06 December 2021
• Law Firm: Appleby
• Author: Mr John Wasty and Sam Riihiluoma

First published in Corporate Live Wire, Bankruptcy & Restructuring - Expert Guide, November 2021

In the absence of a formal equivalent to English administration proceedings or U.S. Chapter 11 proceedings, Bermuda has developed its own unique restructuring regime through the use of provisional liquidation.

For more than 20 years, it has been recognised that the winding up provisions of Bermuda's Companies Act 1981 and Companies (Winding-Up) Rules 1982 empower the Supreme Court of Bermuda to appoint provisional liquidators with powers limited to implementing a restructuring rather than displacing management altogether pending a winding-up of the company. Historically, provisional liquidation was used for a different purpose, namely, to displace management where there was a justifiable fear of a company's assets being dissipated pending the making of a winding up order.

An application to appoint provisional liquidators is made at, or after, the filing of a winding up petition at the Supreme Court of Bermuda. In practice, applications are often commenced by the company itself, with the support of its main creditors. The applicant needs to show a reasonable basis for believing that the company's debts can be restructured. It is therefore important to have a developed...