Conyers Offshore Case Digest (Issue No.11 April - December 2015)

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CAYMAN ISLANDS Company upon the amount determined to be the fair value.” The Court determined that a fair rate of interest would be the mid-rate between the Company’s assumed return on cash (0.2%) and the Company’s assumed USD borrowing rate (9.7%) being 4.95% per annum. Costs of the proceedings were ordered at a later hearing and the Company was ordered to pay the dissenting Shareholders’ costs, to be taxed on a standard basis if not agreed. PETITION STRUCK OUT AS ABUSE OF PROCESS - SECTION 95(3) COMPANIES LAW - AGREEEMENT NOT TO PRESENT WINDING UP PETITION In the Matter of the Companies Law (2013 Revision) and in the Matter of the Exempted Limited Partnerships Law 2014 and in the Matter of Rhone Holdings, L.P. (12-13 August 2015) Rhone Holdings, L.P. was a Cayman Islands exempted limited partnership (the “Partnership”). The Petitioners, who were all limited partners in the Partnership, filed a winding up petition on the just and equitable ground, seeking to have the Partnership wound up in accordance with the Companies Law (2013 Revision) (the “Law”) and the Exempted Limited Partnership Law (2014 Revision) (the “ELPL”). The Partnership had two general partners: Rhone Capital (GP) Ltd. (“Capital GP”) which was controlled by the Petitioners, and Rhone Holdings SLP, L.L.C. (“Holdings GP”) which, along with the Director of Holdings GP, was one of the Respondents. On the hearing of an, ex parte, application filed with the winding up petition, the Court made, amongst other orders, an order appointing joint provisional liquidators (“JPLs”) of the Partnership. Following this, the Respondents filed a Summons seeking orders and directions that the petition be struck out as an abuse of process; that the Petitioners pay the Respondents costs occasioned by the Petition on the indemnity basis; and that the costs of the JPLs be paid by the Petitioners. The Honorable Justice Ingrid Mangatal delivered the Judgment and made the orders sought by the Respondents in substantially the same terms. In reaching the decision, Mangatal J considered a number of clauses in the Amended & Restated Limited Partnership Agreement. Clause 5.12, which was particularly relevant to the issue in the case, read as follows: 5.12 Bankruptcy. The parties agree not to cause…the appointment of a receiver, trustee, custodian, sequestrator, liquidator, administrator, conservator, or similar official for the Partnership or Rhone II, or (b) the Partnership or Rhone II to (1) voluntarily commence any proceeding or file any petition seeking winding up, liquidation, dissolution, reorganization or other relief under any bankruptcy, insolvency, receivership or similar law of any jurisdiction now or hereafter in effect… After considering the relevant sections of the Law and the ELPL, Mangatal J determined that if partners can agree that a partnership can only be determinable by mutual agreement, they can also agree not to present a winding up petition and, specifically in the case, not to do any of the other matters set out in Clause 5.12 of the LPA. Furthermore, there was no principle of public policy that was offended by Clause 5.12; indeed Mangatal J discussed a number of reasons why it is, in keeping with public policy, that limited partners are allowed to enter into agreements regarding the duration of the limited partnership as they think fit. WINDING UP PETITION - APPLICATION BY SHAREHOLDERS TO STRIKE OUT PETITION ON GROUNDS DIRECTORS NOT AUTHORISED In the Matter of China Shanshui Cement Group Limited (Unreported, 25 November 2015) The Grand Court of the Cayman Islands confirmed, in a decision by Mangatal J, that the directors of a company 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 this case 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 Ltd [1979] 1 Ch. 540 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…”. The 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 [2011] 2 CILR 61 (“Re China Milk”). Jones 14
CAYMAN ISLANDS J (applying Section 94(2) of the Companies (Amendment) Law, 2007) 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. Section 94(2), provides as follows: “Where expressly provided for in the articles of association of a company the directors of a company incorporated after the commencement of the Law have the authority to present a winding up petition on its behalf without the sanction of a resolution passed at a general meeting”. Jones J concluded that the Cayman Legislature must have intended that Section 94(2) would only apply to solvent companies. In this matter, Mangatal J declined to follow the Judgment of Jones J in Re China Milk. Although the Company in Re China Shanshui Cement was incorporated before 2009 (and hence Section 94(2) was found to be irrelevant), Mangatal J concluded that: “…whatever the intention of the Legislature may have been, all Section 94(2) did was to provide statutory confirmation that, as was previously held in Re Emmadart, where the articles of association of a company expressly authorise its directors to present a winding up petition on its behalf, the directors do not also need to obtain the sanction of a resolution passed in general meeting”. The restriction on directors statutory authority to petition the Court to wind up the company, as confirmed by the Re Emmadart case, has been criticised (and reversed by statute in England) and not followed in some Commonwealth countries. However, as a result of this decision, it is now clear that the position in Re Emmadart does represent the law in the Cayman Islands. Editor’s note – The position in the Cayman Islands should be contrasted with the postion in Bermuda where it has been held that the directors will have standing to petition on behalf of an insolvent company, provided that the bye-laws do not prohibit such an application (see Re First Virginia Reinsurance Ltd. [2003] BLR 47). This authority has been relied on in order to facilitate director instigated petitions in numerous cases since. APPARENT BIAS - JUDGES SITTING IN MULTIPLE JURISDICTIONS Wael Almazeedi -v- BTU Power Company (in official liquidation) (Unreported, 20 November 2015) This Appeal considered two important questions. First, when sitting in Jurisdiction A in a case concerning parties who are domiciled in Jurisdiction B, should a judge disclose their connection with Jurisdiction B or even recuse himself? Second, does it make a difference that the party domiciled in Jurisdiction B is closely connected with the government in Jurisdiction B or that the Judge’s status as a judge in Jurisdiction B may depend on the power of the government in that jurisdiction to terminate that status? Justice Sir Peter Cresswell, a judge of the Financial Services Division of the Grand Court of the Cayman Islands, heard the petition for the winding up of the Respondent, made a winding up order and appointed the Respondent’s liquidators. Cresswell J was also unknown to BTU Power Company’s (“BTU”) sole director and chief executive officer Mr. Wael Almazeedi (the “Appellant”), a supplementary judge of the Qatar International Court. The problem with this connection was that a number of the preference shareholders in BTU, who had presented the winding up petition, were in fact related to the Qatari Government. The concern in these circumstances was that the Judge may have been subject to the doctrine of apparent bias: that is to say that, in the absence of any actual bias, nevertheless the appearances of the thing are such that the Judge should not have sat on the case in question. The modern test for apparent bias was stated by Lord Hope in Porter -v- Magill 1 in these terms: “The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased”. In coming to a decision, this particular case required Right Honourable Justice Sir Bernard Rix to consider the role that the Minister of Finance plays in the appointment and removal of judges in Qatar. The Minister of Finance is in fact a pivotal figure in determining certain appointments and removals of members of the Court. His Excellency Ali Shareef Al Emadi (“Mr. Al Emadi”) was appointed Minister of Finance and Chairman of the Council of Ministers on 26 June 2013. The appointment of Mr. Al Emadi was significant because he had previously been CEO of a subsidiary of one of the original petitioners in the winding up, and also significant preference shareholder in BTU. 1 . [2011] UKHL, [2002] 2 AC 357 AT [103] 15
Page 1 and 2: APRIL 2015 - DECEMBER 2015 ISSUE NO
Page 3 and 4: ABOUT THE DIGEST The Offshore Case
Page 5 and 6: BERMUDA the parties involved can be
Page 7 and 8: BERMUDA apply to many cases, and as
Page 9 and 10: BRITISH VIRGIN ISLANDS INTERLOCUTOR
Page 11 and 12: BRITISH VIRGIN ISLANDS INTERLOCUTOR
Page 13 and 14: BRITISH VIRGIN ISLANDS standing, ot
Page 15: CAYMAN ISLANDS On 18 September 2012
Page 19 and 20: CAYMAN ISLANDS The Judgment of the
Page 21 and 22: INDEX Arbitration 7 BVI - CIVIL APP

Conyers Offshore Case Digest (Issue No.11 April - December 2015)

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