Worldwide: Court Of Appeal Provides Clarity With Respect To The Weight To Be Accorded To The Views Of Participating Shareholders As To The Identity Of Liquidators

Last Updated: 22 November 2019
Article by Walkers  

Most Read Contributor in Cayman Islands, November 2019

The Court of Appeal of the Cayman Islands has confirmed that once it has been established that a solvent liquidation will be more "effective", "economic" or "expeditious" if brought under the supervision of the Court pursuant to Section 131(b) of the Companies Law (2018 Revision), the views of participating shareholders as to the identity of the liquidators should be respected; and that a fund manager should take a measured and neutral approach to any such application by a shareholder to assist the Court to determine whether the grounds for the application have been made out as well as the identity of the liquidators. It is not appropriate (without justification) for a fund manager to seek to oppose a petition and/or to frustrate a participating shareholder's attempts to appoint its preferred choice of liquidators.

On 8 November 2019, the Court of Appeal of the Cayman Islands handed its judgment down in Re Asia Private Credit Fund Limited (in voluntary liquidation) (Civil Appeal No. 17 of 2019 and Civil Appeal No. 27 of 2019 (Consolidated) (Cause No. FSD 232 of 2018) and Re Adamas Asia Strategic Opportunity Fund (in voluntary liquidation) (Civil Appeal No. 26 of 2019) (Cause No. FSD 72 of 2019): two related appeals concerning the meaning and effect of Section 131(b) of the Companies Law (2018 Revision), setting out the requirements of which the Court must be satisfied before ordering that a voluntary solvent liquidation be continued under the supervision of the Court.

Led by Barnaby Gowrie (Partner) and Chris Keefe (Senior Counsel) and assisted by Luke Petith and Siobhan Sheridan, Walkers (Dubai and Cayman) acting for the Petitioner (being the sole participating shareholder of each Fund) were wholly successful in crossappealing an order of the Grand Court that representatives from both FTI (being the Petitioner's nominees) and the incumbent joint voluntary liquidators (being the relevant Fund Manager's nominees) be appointed as official liquidators of a Fund; and opposing appeals in both cases brought by the Fund Managers against the Orders of the Grand Court bringing the voluntary liquidations of the Funds under the supervision of the Court.

In both cases, the Petitioner (being the sole participating shareholder of each Fund) had requested that the Fund Manager exercise shareholder voting rights (exercisable only in respect of the Founder or Manager Shares held by the Fund Manager) to appoint representatives of FTI as voluntary liquidators of the Funds. Notwithstanding such request, the Fund Managers unilaterally elected to appoint their own choice of joint voluntary liquidators.

The Petitioner commenced proceedings under Section 131(b) of the Companies Law (2018 Revision) citing concerns regarding, amongst other things, the operation of the Funds (including, the decrease in value of its investments and the possible duplication of fees within the fund structure) as well as the involvement of a former employee of the Petitioner in the Petitioner's investments into the Funds (who had been convicted of misappropriation and embezzlement of state funds during his employment by the Petitioner).

In the first case subject to appeal, McMillan J at first instance ordered that the voluntary liquidation be brought under the supervision of the Court and directed that the FTI liquidators be appointed in addition to the incumbent joint voluntary liquidators; and in the second case subject to appeal, Kawaley J also ordered that the liquidation be brought under the supervision of the Court, but ordered that the FTI liquidators (being those nominated by the Petitioner) should be appointed in place of, rather than in addition to, the incumbent joint voluntary liquidators.

The Fund Managers appealed both judgments – in respect of the supervision order made by McMillan J, principally on the basis that the Judge failed to establish that the jurisdictional requirements of Section 131(b) had been made out and failed to give sufficient reasons for his decision; and in respect of the supervision order made by Kawaley J, on the basis that the Judge was wrong to conclude that Section 131(b) could be used to replace incumbent voluntary liquidators with the Petitioner's proposed nominees. The Petitioner cross-appealed the supervision order made by McMillan J on the basis that irrelevant considerations were taken into account when jointly appointing the incumbent voluntary liquidators as official liquidators and that the decision was outside the margin of appreciation in the exercise of the Judge's discretion.

The Court of Appeal dismissed both appeals brought by the Fund Managers and upheld the cross-appeal brought by the Petitioner. In the first appeal, the Court of Appeal set aside the supervision order made by McMillan J on the basis that the Judge had failed to identify the jurisdictional basis on which the order was made; however, notwithstanding this, the Court of Appeal nevertheless found that it was open to it to make its own findings on the evidence and ordered that the voluntary liquidation be brought under the supervision of the Court and that the Petitioner's nominees (representatives of FTI) be appointed as official liquidators. The Court of Appeal commented that, if it appointed the incumbent joint voluntary liquidators of the Fund, such appointment would undermine the effectiveness of the supervised liquidation by an appearance of partiality attaching to the joint voluntary liquidators resulting from their original appointment by Fund Manager (whose role and conduct of the affairs of Fund Company would be the subject of investigation). In the second appeal, the Court of Appeal upheld the supervision order made by Kawaley J (under which FTI had been appointed as liquidator).

In summary, the Court of Appeal found that Kawaley J adopted the correct approach in his "wide-ranging and impressive judgment", in which he found that whilst the articles of association gave the power to commence a voluntary liquidation to the holder of management or founder shares, the participating shareholders were the primary economic stakeholder in relation to a voluntary liquidation; and that the starting assumption in determining the choice of voluntary liquidator should be to give weight to the views of the majority of economic stakeholders. The Court of Appeal agreed that it was appropriate to reject the Fund Manager's submissions that, in such circumstances, participating shareholders have no right to influence the choice of voluntary liquidator (or decide the appropriate winding up process).

Whilst there may be particular circumstances which might justify a departure from the general rule, the Court of Appeal has made clear that, where the sole participating shareholder nominates a fit and proper person as voluntary liquidator, the holder of voting shares should not, absent exceptional circumstances, take steps to oppose or frustrate the appointment of such nominee(s).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions