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In furtherance to my litigation colleague, Nigel Meeson’s, recent article [click here to view], the following gives a corporate perspective on the Cayman Court’s recent decision with regard to the power of directors of a company to present a winding up petition.
The Grand Court of the Cayman Islands confirmed, in a decision by Mangatal J dated 25 November 2015 in Re China Shanshui Cement Group Limited, that the directors of a company1 do not have statutory authority to petition the court to wind up the company (whether the company is solvent or insolvent) without the sanction of a resolution of shareholders, unless the articles of association of the company expressly provide otherwise.
In Re China Shanshui Cement, a winding up petition submitted by the directors of the company was struck out for lack of standing to file the petition. This decision has re-affirmed the application in the Cayman Islands of the English case of Re Emmadart Ltd2 in which Brightman J had concluded that:
“The practice which seems to have grown up [in England], under which a board of directors of an insolvent company presents a petition in the name of the company where this seems to the board to be the sensible course, but without reference to the shareholders, is in my judgment wrong and ought no longer to be pursued, unless the articles confer requisite authority, which article 80 of Table A does not.” 3
The Re China Shanshui Cement decision restores what was generally understood to have been the position under Cayman Islands law until the position was impacted by the first instance decision of Jones J in the Cayman Islands case of Re China Milk Products Group Ltd. Jones J (applying what some saw as a rather strained interpretation of the legislation, as amended by the Companies (Amendment) Law, 2007) had held in 2011 that the directors of an insolvent company are entitled to present a winding up petition on behalf of a company without reference to shareholders and irrespective of the terms of the company’s articles.
To continue reading full articles in PDF format:
Cayman Islands Directors’ Powers to Petition for Winding Up – A Corporate Perspective
1Per Section 36 of the Exempted Limited Partnership Law, 2014, the provisions of Part V of the Companies Law (being sections 89 to 155) apply to exempted limited partnerships and references to a director include reference to the general partner of an exempted limited partnership.
2 1 Ch 540 – the effect of Re Emmadart Ltd was reversed by the Insolvency Act 1986 in England (S.124) but in Banco Economico S.A. v Allied Leasing and Finance Corporation  CILR 102, the Re Emmadart Ltd case was confirmed as having represented Cayman Islands law at that time.
3Article 80 of Table A was a general empowering article authorizing the directors, subject to conditions, to exercise the powers of the company.