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As a jurisdiction that currently has no formal restructuring regime, the appointment of a provisional liquidator has long since been utilised for the purpose of facilitating a corporate restructuring in the Cayman Islands.
A provisional liquidator may only be appointed following the presentation of a winding up petition against a company1. Pursuant to Section 94(1) of the Companies Law one of the persons2 able to petition to wind up a company is the company itself. This has historically resulted in directors of a company presenting a petition to wind up the company absent approval from the shareholders in general meeting or express authorisation in the articles.
This historic practice received judicial approval in the 2011 judgment of Jones J in re China Milk Products Group Ltd3. in which it was held that the directors of an insolvent company could petition to wind up the company without approval of the shareholders.
Whilst convenient from the perspective of both directors of insolvent companies and the restructuring community generally, the decision in China Milk was considered to be contrary to the express provision of Section 94(2) of the Companies Law which provides that a company may petition for its own winding up on the following basis:
“Where expressly provided for in the articles of association of a company the directors of a company incorporated after the commencement of this Law have the authority to present a winding up petition on its behalf without the sanction of a resolution passed at a general meeting.”
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Another Chapter in the China Milk Saga
1Section 104(1) Companies Law, 2016 Revision
2Together with a creditor, contributory and CIMA
3 (2) CILR 61