The Companies Act (2021 Revision) and Silver Base Group Holdings Ltd

• Jurisdiction: Cayman Islands
• Judge: Justice David Doyle
• Judgment Date: 08 December 2021
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 329 of 2021 (DDJ)

In the Matter of the Companies Act (2021 Revision)

And in the Matter of Silver Base Group Holdings Limited

Before:

The Hon. Justice David Doyle

CAUSE NO: FSD 329 of 2021 (DDJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Appointment of light-touch provisional liquidators for restructuring purposes — importance of the laws of the place of incorporation of a company — the need to take into account the position of creditors — sections 95(1)(b) and 104 of the Companies Act (2021 Revision) — adjournment of winding up petition — winding up proceedings also filed in Hong Kong — comity concerns dealt with

Appearances:

Mr Jonathon Milne and Ms Róisin Liddy-Murphy of Conyers Dill & Pearman LLP for the Company

Introduction

1 This judgment should be read in the light of the judgment I delivered on 22 November 2021.

2 I have considered the pleadings, the evidence, the skeleton arguments and the oral submissions of Mr Jonathon Milne who with Ms Róisin Liddy-Murphy appears today on behalf of Silver Base Group Holdings Limited (the “Company”). I am grateful to them for their helpful assistance to the Court. In allaying the concerns of the creditors and the Court they have displayed first class written and oral advocacy skills. No one has appeared today to oppose the relief requested by the Company.

3 I have however considered the views of the creditors which have been put before the court including the letters dated 29 November 2021 and 6 December 2021 from Katherine Chan Law Office for Mr WANG Jianfei a dissatisfied significant creditor of the Company, communications from Shao Bin, Mayfair & Ayers Financial Group Limited, Patrick Chu, Conti Wang Lawyers LLP, Fan Wu on behalf of his father, and numerous others.

The Law

4 I have considered the relevant statutory provisions including sections 95(1)(b) and 104 of the Companies Act (2021 Revision) (the “ Companies Act”).

5 I have considered the relevant local case law, emanating from the formidable judicial quartet of Justices Smellie, Kawaley, Segal and Parker including the following judgments:

• (1) Parker J in ( CW Group Holdings Limited FSD; unreported judgment 3 August 2018);

• (2) Kawaley J in ( ACL Asean Towers Holdco Limited FSD; unreported judgment 8 March 2019);

• (3) Smellie CJ in ( Sun Cheong Creative Development Holdings Limited FSD; unreported judgment 20 October 2020); and

• (4) Segal J in ( Midway Resources International FSD; unreported 30 March 2021).

The importance of the laws of the place of the Company's incorporation

6 The Company is incorporated under the laws of the Cayman Islands. I have full regard to the importance of the laws of the place of a company's incorporation and the international recognition of light-touch provisional liquidators appointed for restructuring purposes. See The Law of Insolvency 5 ^th Edition (2020) Ian Fletcher at paragraph 30–054; Dicey, Morris & Collins on The Conflict of Laws (Fifteenth Edition) rules 175 and 179; Chief Justice Smellie in Sun Cheong; Harris J in Re China Huiyan Juice Group Limited [2020] HKCFI 2940 (19 November 2020) and Harris J in Li Yiging v Lamtex Holdings Ltd [2021] HKCFI 622.

7 Ian Fletcher puts it well at paragraph 30–054 when he refers to the long accepted fundamental principle that the law of the place of a company's incorporation is primarily, “possibly immutably”, competent to control all questions concerning a company's initial formation and subsequent existence. Dicey Rule 179 sets out the common law and private international law position that the authority of a liquidator (and I would add a provisional liquidator) appointed under the law of the place of incorporation should be recognised in other jurisdictions.

8 Dicey Rule 175(2) under the heading “Corporations and Insolvency” citing at footnote 78 caselaw from as long ago as 1843 states:

“All matters concerning the constitution of a corporation are governed by the law of the place of incorporation.”

This fundamental principle has been etched on my mind ever since Buckmaster and Moore v Fado Investments 1984 – 86 MLR 252 (in respect of foreign partnerships) — challenging experiences in court are always memorable.

9 Lord Sumption (who also sits in the Hong Kong Court of Final Appeal) at paragraph 23 of his much read judgment in Singularis Holdings Limited v PriceWaterhouseCoopers [2014] UKPC 36 also emphasised the importance, in international insolvency cases, of respecting and having full regard to the laws of the relevant company's place of incorporation.

10 I note Mr Milne's observation that the Cayman Islands has not adopted the UNCITRAL Model Law on Cross-Border Insolvency and that this court should place emphasis on the laws of the place of the Company's incorporation and in effect not be too influenced by the observations of Harris J in Hong Kong in respect of the laws of a company's centre of main interests.

11 Mr Milne is right to stress that the Cayman Islands is a jurisdiction of substance:

“…the Cayman Islands is a highly sophisticated jurisdiction with a predictable and highly-regarded legal system. There are many reasons that Hong Kong-listed companies, in particular, choose to be incorporated in the Cayman Islands, such as:

• a. the essential basic company law framework is based on English law concepts covering the whole life cycle of the company from incorporation to dissolution. The statutory regime and corporate governance framework is modern and flexible, which enables companies to meet and adapt to the listing rule requirements of a major stock exchange;

• b. there is an appropriate balance under the Companies Act in relation to restructuring and insolvency issues, with officeholders and the Court ensuring careful regard to the interests of management and all stakeholders; and

• c. incorporation and maintenance costs of a Cayman Islands company are relatively low. There are experienced practitioners in the areas of legal, corporate and accounting services for Cayman Islands companies located in Hong Kong.”

12 The Cayman Islands is plainly a jurisdiction of substance which legitimately facilitates world trade and develops the common law to the great economic benefit of many jurisdictions worldwide. If higher authority is required to support that proposition one need only turn to Lady Arden's important lecture at The Peace Palace in The Hague (3 February 2020) on The Judicial Committee of the Privy Council as an important source of financial services jurisprudence which generously acknowledged the significant contribution of the Cayman Islands to such jurisprudence and its “importance in today's world in commercial terms”, emphasising how the jurisdiction legitimately attracts “massive funds for investment” and how the determination of those weighty financial cases “inspires respect for the rule of law.”

Hong Kong case law

13 In view of the Company's substantial connections with Hong Kong and other areas of the People's Republic of China I have considered some of the Hong Kong case law including:

• (1) Deputy High Court Judge William Wong SC in Moody Technology Holdings Limited (in provisional liquidation for restructuring purposes) (12 March 2020);

• (2) Harris J in Re China Huiyan Juice Group Ltd [2020] HKCF 1 2940;

• (3) Harris J in Li Yiqing v Lamtex Holdings Ltd [2021] HKCFI 622;

• (4) Harris J in Re China Bozza Development Holdings Ltd [2021] HKCFI 1235;

• (5) Harris J in Ping An Securities (Holdings) Ltd [2021] HKCFI 651;

• (6) Harris J in Victory City International Holdings Ltd [2021] HKCFI 1370; and

• (7) Harris J in China Oil Gangran Energy Group Holdings Limited [2021] HKCFI 1592.

The initial lack of notice to creditors and comity concerns

14 I was initially concerned over lack of notice to the creditors and comity in respect of the Hong Kong proceedings. These two concerns have now been dealt with.

15 Firstly, I adjourned on 22 November 2021 to enable creditors to be given further notice. The initial adjournment was to 1 December 2021 and then a further adjournment to today 8 December 2021 to give the creditors more time to express their views.

16 Secondly, in relation to the comity concern Mr Milne has skillfully and pragmatically dealt with that concern in amended paragraph 4 of the latest draft Order. In effect the Hong Kong proceedings are carved out of the statutory moratorium if the Hong Kong Court sees fit to do so. Moreover it is open to any creditor to apply to this court seeking leave to proceed against the Company notwithstanding the appointment of the joint provisional liquidators (“JPLs”).

Various other concerns and issues

17 In light of the opposition of numerous creditors I had concerns as to the viability of any restructuring proposals but again Mr Milne has skillfully and pragmatically allayed those concerns by including an amended paragraph 3(v) of the latest draft Order in effect requiring the JPLs to report to the court on the feasibility of a restructuring for the benefit of the Company's creditors.

18 I was also concerned that the original draft Order did not require the JPLs to...