Adenium Energy Capital, Ltd

• Jurisdiction: Cayman Islands
• Judge: Justice Cheryll Richards
• Judgment Date: 01 February 2022
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. FSD 54 of 2020 (CRJ)

In the Matter of the Companies Act (2020 Revision)

In the Matter of Adenium Energy Capital, Ltd. (In Official Liquidation)

Before:

The Hon. Justice Cheryll Richards Q.C.

CAUSE NO. FSD 54 of 2020 (CRJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

The Companies Act (2020 Revision), section 97 (1), test to be applied, whether leave required to continue proceedings against company in liquidation.

Appearances:

Mr. Brett Basdeo and Ms. Annalisa Shibli of Walkers on behalf 12 of the Joint Official Liquidators

Mr. Robert Levy QC instructed by Mr. Christopher Harlowe and Mr. Laurence Aiolfi of Mourant

1 Adenium Energy Capital, Ltd. (in Official Liquidation) (the “Company”), is registered in the Cayman Islands as an exempt company limited by shares. In August 2019, the Grand Court granted leave for the enforcement of an Arbitral Award made in Dubai on the 8 ^th March 2019, (the “Arbitral Award”). The Arbitral Award was made against the Company in favour of Bareeq Capital in the amount of some US $2.25 million together with interest and costs. Judgment was entered by the Court in terms of the Arbitral Award.

2 By petition presented on the 25 ^th March 2020, Bareeq Capital sought the winding up of the Company following its non-payment of the said Arbitral Award, (the “Petition”). By Winding Up Order made on the 27 ^th July 2020, Mr. Christopher Kennedy and Mr. Alexander Lawson were appointed as Joint Official Liquidators (“JOLs”) of the Company. By virtue of s.100 (2) of the Companies Act (2020 Revision), (the “ Companies Act”) the winding up of a company by the Court is deemed to commence at the time of the presentation of the Petition for winding up (“the Commencement Date”).

3 There are three Summonses before the Court.

4 The first is a Summons dated 15 ^th October 2020, (the “October Summons”). By the October Summons the JOLs seek declaratory orders that three transfers of the Company's property to KSB Capital (Offshore) SAL (“KSB”) which were made after the Commencement Date are void pursuant to s.99 of the Companies Act and for consequential rectification and declaratory orders, damages and costs.

5 The three transfers are shares held in three entities as follows:

• i. 1000 Class A Shares in Yasmeen Solar Jordan Limited (Yasmeen) on or around the 26 ^th May 2020 or 2 ^nd June 2020.

• ii. 330 Class A Shares and 63,350 Class B Shares in Adenium Solar Jordan Limited (“ASJ”) on or around the 2 ^nd June 2020.

• iii. 1,000 shares Class B Shares in Zeini Limited (“Zeini”) on or around the 15 ^th June 2020.

6 The first two entities Yasmeen and ASJ are exempted companies incorporated in the Cayman Islands. Zeini is a company incorporated in the British Virgin Islands.

7 The second Summons is dated 20 ^th November 2020 (the “November Summons”). By this Summons KSB seeks to be added as a Respondent to the October Summons and for declarations that the three transfers were not dispositions of the Company's property pursuant to s.99 of the Companies Act and are not void by virtue of that provision. Alternatively, an order is sought that the dispositions of property by way of these transfers shall not be void by virtue of the said provision. The costs of the application are sought to be paid out of the assets of the Company as an expense of the liquidation.

8 The third Summons is dated 15 ^th January 2021 and is filed by KSB, (the “January Summons”). It seeks in summary the following:

• i. That the JOLs' Summons of 15 ^th October 20020 be entirely struck out on the ground that it is frivolous and/or vexatious and/or is otherwise an abuse of the process of the Court.

• ii. Alternatively that KSB is granted leave retrospectively pursuant to s.97 (1) of the Companies Act to commence and proceed with the November Summons.

• iii. Costs

9 The JOLs take the preliminary point that leave is required by KSB in respect of both the November and January Summonses and that leave ought not to be granted in the circumstances of this case. KSB argues that it ought to have been joined by the JOLs to the October Summons and that its actions are defensive in nature. Alternatively, KSB says that it ought to be granted leave as a matter of course as it is a secured creditor seeking to enforce proprietary rights obtained by way of a Debenture Agreement dated 30 ^th May 2019.

The Evidence

10 The October Summons filed on behalf of the JOLs is supported by the Third Affidavit of Mr. Kennedy 1. He attests that the books and records of the Company include certain resolutions made on the 26 ^th May 2020, (the “May Resolution”) and the 2 ^nd June 2020, (the “June Resolution”). By the May Resolution, the Company purported to transfer the shares held in the above named three entities to KSB for a cash consideration of $1.00. 2

11 By the June Resolution, the Company purported to cancel and replace the May Resolution. The June Resolution described the Company as a borrower, (the “Borrower”) from four creditors under certain facility agreements dated 9 ^th March 2017, 18 ^th October 2017, 22 ^nd and 26 ^th February 2018, 1 ^st March 2018 and 24 ^th September 2018. The June Resolution further states that as a condition for the funding, the four creditors and the Company entered into and executed a Debenture Agreement dated 30 ^th May 2019, (the “Debenture”). The amount outstanding as at 19 ^th November 2019 was approximately US$6 million. 3

12 KSB is described in each of the May Resolution and the June Resolution as a company owned by affiliates of the creditors. Transfers of shares held by the Company in the three entities were made on the said 19 ^th November 2019 in partial enforcement of the rights under the Debenture. The value of the shares transferred was approximately US$5.1 million. This left a loan balance of approximately US$1.7 million. The three questioned transfers to include shares in ASJ of an agreed asset value of US$1.5 million were transferred in respect of this outstanding amount.

13 Mr. Kennedy states his belief that as these transfers were effected after the date of the filing of the Petition without Court approval, they are automatically void pursuant to s.99 of the Companies Act.

14 On the 24 ^th September 2020, the JOLs issued a cease and desist notice to the registered offices of ASJ, Yasmeen and Zeini with respect to the transfers. The responses to this notice included

that the Registers of Members of ASJ, Yasmeen and Zeini Limited are not maintained by the registered offices but by the entities themselves

15 A similar letter was sent to KSB on the 2 ^nd October 2020. The letter stated in part:-

“…However, based on information provided to us by the Company's directors, we understand the Debenture was entered into to provide fixed and floating security over all of the Company's assets, estimated at approximately US$58,887,000 as of 31 December 2018, for certain loan facilities provided to the Company totaling US$6,483,924.42 (the “ Loan Facilities”).

With respect to the 2019 securities, the value attributed to these assets was substantially lower in some cases than the value that was attributed to them in the Company's previous financial year, with no disclosure of the method of valuation used, and which were transferred without reference to outstanding debts owed to the Company's creditors. In the circumstances, we believe these transfers were therefore invalid, pursuant to section 145 of the Companies Law of the Cayman Islands (the “ Companies Law”), such that the Company maintains a proprietary interest in the 2019 Securities. Accordingly, any further dealings with the 2019 Securities, or any realisation thereof, should immediately cease.

With respect to the 2020 Securities, the impropriety of these transfers is clear.… Nevertheless, pursuant to section 99 of the Companies Law, any disposition of the Companies property after 25 March 2020 (the date on which the winding up of the Company was deemed to commence) without the approval of the Grand Court is automatically void, i.e. null and of no effect. Accordingly, the 2020 Securities remain the property of the Company and the recipients of such property, or any realisation thereof, would be considered constructive trustees of such property for the benefit of the Company.

Overall, the transfers of both the 2019 Securities and the 2020 Securities appear to have been effected in breach of the several laws of the Cayman Islands and we believe would likely be declared fraudulent by the Grand Court. Pending the Grand Court's determination of the same, any party subsequently found to have knowingly assisted with illegitimate or unlawful actions or conduct may also be subject to civil and /or criminal liability. As a potential unlawful recipient of the Company's assets, you are hereby on notice of actions that may require your assistance or may otherwise be taken against you.”

16 KSB's response included the suggestion that the JOLs await substantive responses from the Lenders and a denial of the matters outlined in the letter.

17 The JOLs have filed two additional Affidavits. The First Affidavit of Ms. Annalisa Peccarino 4 provides evidence of service of the October Summons and supporting Affidavit on the three

entities and on KSB on or about the 16 ^th October 2020. The First Affidavit of Ms. Benicha Tyndale 5 in part produces two legal advices provided to the Company on the 2 ^nd October 2019 and 29 ^th May 2020

18 The November Summons is supported by the First Affirmation of Mr. Wassef Sawaf dated 30 ^th November 2020. He attests that he is duly authorised to make the Affirmation on behalf of KSB. In summary he states therein that the Company was provided by certain creditors 6 with loan facilities amounting to US$6 million towards its ongoing operational expenditure. He exhibits requests from two of the lenders dated 1 ^st and 5 ^th May 2019 for a charge over the assets of the...