When Can A Company Apply For Its Own Winding Up In The Cayman Islands?

A recent decision of the Grand Court of the Cayman Islands has considered the ability of a company to apply for its own winding up. Construing s.94(1)(a) of the Companies Law (2013 Revision) (the "Law"), the Court upheld the pre-2011 view that while a company acts through its directors, those directors have no authority to present a winding up petition absent: (a) a resolution of the shareholders of the company resolving that the company present a winding up petition; or (b) an express provision in the articles of association of the company authorising the directors to present a winding up petition on behalf of the company - a general provision giving the directors all of the powers of management of the company is insufficient.

Facts

In the Matter of China Shanshui Cement Group Limited, unreported, 25 November 2015, Mangatal J. dismissed a winding up petition presented in the Grand Court of the Cayman Islands by the board of directors of China Shanshui Cement Group Limited (the "Company") on the basis of alleged cash flow insolvency (the "Petition"). Contemporaneously with the Petition, the board made an ex parte on notice application, purportedly on behalf of the Company, to appoint restructuring joint provisional liquidators (the "JPLs") under section 104(3) of the Law (the "Application").

The Petition and the Application were filed on 10 November 2015 without obtaining a resolution of the Company's shareholders. As per the requirements of the Stock Exchange of Hong Kong (the "SEHK"), the Company filed an announcement of the filing of the Applications with the SEHK. That announcement was made in Hong Kong on 11 November 2015, a matter of hours before the Application was listed for an ex parte hearing before the Court.

Following submissions made on behalf of, inter alios, two shareholders of the Company, who together held over 53% of the Company's shares, Tianrui (International) Holding Company Limited and China Shanshui Investment Company Limited (together, the "Majority Shareholders"), the Court ruled that the matter was not so urgent that interested shareholders and creditors of the Company should be deprived of proper notice and a period of time to consider their positions, including whether they wished to be heard on the Application. The Application was adjourned for an inter partes hearing on 18 November 2015, with subsequent hearings taking place on 19 and 23 November 2015, with increasing numbers of creditors being represented at...