The Companies Act (2022 Revision) (as Amended) and Oriente Group Ltd.

• Jurisdiction: Cayman Islands
• Judge: Justice Kawaley
• Judgment Date: 08 December 2022
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO: FSD 231 OF 2022 (IKJ)

In the Matter of the Companies Act (2022 Revision) (As Amended)

And in the Matter of Oriente Group Limited

Before:

The Hon. Justice Kawaley

CAUSE NO: FSD 231 OF 2022 (IKJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Petition to appoint restructuring officers presented by company-whether prior filing of creditor's petition within the jurisdiction deprived the company of the right to commence and/or prosecute a restructuring petition-automatic stay triggered by presentation of restructuring petition-implications of creditor commencing foreign winding-up proceedings after the commencement of local restructuring proceedings-requirements for appointing restructuring officers—Companies Act (2022 Revision) as amended by Companies (Amendment) Act, 2021, sections 91A-91J, 94(a)-Companies Winding Up Rules 2018, as amended by Companies Winding Up (Amendment) Rules 2022, Order 1A

Appearances:

Mr Matthew Goucke, Ms Siobhan Sheridan and Ms Fiona MacAdam of Walkers on behalf of Oriente Group Limited (the “Company”/the “Petitioner”)

Mr Jamie McGee of Bedell Cristin on behalf of Liu Chak Kwan Kelvin and Tsangs Group Holdings Limited (the “Creditors”)

IN COURT

Introduction and Summary

1 The Company's Petition was presented on 21 October 2022 pursuant to section 91B of the Companies Act (2022 Revision) as amended by the Companies (Amendment) Act, 2021 (the “Act”). It was said to be the first petition to seek the appointment of restructuring officers under the new Part V of the Act 1. According to the Petition, the Company was the parent company of a group of companies which was “ a leading Southeast Asian financial technology platform established by the co-founders of revolutionary internet companies Skype and Lu.com (NYSE: LU), and also Atomico, one of the leading global venture capital firms” (paragraph 2). It sought the appointment of restructuring officers on the grounds that the Company:

“ (a) is presently unable to pay its debts and is therefore insolvent within the meaning of section 93 of the Act; and

(b) intends to present a compromise or arrangement to its creditors (or classes thereof) pursuant to section 86 and/or section 91I of the Act, the law of a foreign country, or by way of a consensual restructuring” (paragraph 5).

2 In the Company's Written Submissions, it was asserted that the “ Company has taken steps to, and intends to take further steps with the assistance of the Proposed Restructuring Officers, to develop and propose a holistic and viable restructuring plan to restructure the Group's financial indebtedness” 2. In the Company's evidence, the broad parameters of the “ Proposed Restructuring” were sketched out and it was confidently asserted that this would generate a better return for unsecured creditors than would be yielded through a traditional liquidation. It was also submitted (and supported through evidence) that “ 24 Noteholders (representing approximately 46% by value of the Notes) have expressed their support for the Proposed Restructuring”. 3 This evidence was not challenged by the Creditors, who appeared in opposition to the Petition. However, the Creditors noted that one of the 24 Noteholders was a related party as he was a director of the Company. The Proposed Restructuring appeared to have attracted at a very early stage very significant creditor support, a factor which provided powerful support for the application to appoint restructuring officers to be granted. It was clear from Mr Goucke's clear, comprehensive yet concise Written Submissions and the supporting evidence that the legal and evidential requirements for granting the Company's application had been met.

3 The only opposition which was ultimately advanced rested on a technical jurisdictional challenge which seemed to me to be a tactical ploy. The point seemed designed to discredit the apparently straightforward proposition that the Creditors' filing of a winding-up petition in Hong Kong the day before the present hearing (seemingly without the knowledge of local counsel) was a flagrant breach of the automatic stay triggered by the filing of the present Petition. Be that as it may, I concluded that the jurisdictional challenge was clearly misconceived and, having rejected it, the sole objection raised by the Creditors to the substantive application to appoint restructuring officers fell away. I accordingly granted the Company's application on 11 November 2022 in the following terms substantially based on the draft form of order submitted by counsel to the Court and set out in full by way of appendix to this Judgment.

4 These are the reasons for that decision to appoint Mr Kenneth Fung of FTI Consulting (Hong Kong) and Mr Andrew Morrison and Mr David Griffin of FTI Consulting (Cayman) Limited as joint restructuring officers (“JROs”) of the Company.

The jurisdiction to appoint restructuring officers

The statutory regime

5 Section 91B of the Act so far as is relevant provides as follows:

“ 1) A company may present a petition to the Court for the appointment of a restructuring officer on the grounds that the company:

a) is or is likely to become unable to pay its debts within the meaning of section 93; and

b) intends to present a compromise or arrangement to its creditors (or classes thereof) either, pursuant to [the Companies Act], the law of a foreign country or by way of a consensual restructuring.

…

(3) The Court may, on hearing a petition under subsection (1) —

(a) make an order appointing a restructuring officer;

(b) adjourn the hearing conditionally or unconditionally;

(c) dismiss the petition; or

(d) make any other order as the Court thinks fit, except an order placing the company into official liquidation, which the Court may only make in accordance with sections 92 and 95 if a winding up petition has been presented in accordance with sections 91G and 94.

(4) A restructuring officer appointed by the Court … shall have the powers and carry out only such functions as the Court may confer on the restructuring officer in the order appointing the restructuring officer, including the powers to act on behalf of the company.”

6 The only issues which arose for consideration as regards these statutory provisions were: (a) whether the two preconditions for presenting a petition had been met; (b) whether restructuring officers should be appointed; and, if so, (c) what powers should be conferred on them. The Companies Winding Up Rules, 2018 as amended by the Companies Winding Up (Amendment) Rules, 2022 (the “CWR”) introduce, inter alia, the following new procedural requirements applicable to restructuring petitions:

“ Presentation, Filing and Advertisement of Petition (O.1A, r.1)

1. (1) A petition by the company for the appointment of a restructuring officer pursuant to section 91B of the Act shall be presented by filing it in Court in accordance with GCR Order 9.

(2) The petitioner shall pay the filing fee prescribed in the First Schedule of the Court Fees Rules.

(3) Unless the Court otherwise directs, every petition for the appointment of a restructuring officer shall be advertised once in a newspaper having a circulation in the Islands. An advertisement published in accordance with this Rule shall be in CWR Form No. 3A.

(4) In addition, unless the Court otherwise directs, if the company is carrying on business outside the Islands, every petition for the appointment of a restructuring officer shall be advertised once in a newspaper having circulation in a country (or countries) in which it is most likely to come to the attention of the company's creditors (including any contingent or prospective creditors) and contributories (in which case the advertisement must be published in the official language of such country or countries).

(5) The advertisements shall be made to appear not more than 7 business days after the petition for the appointment of a restructuring officer is filed in Court and not less than 7 business days before the hearing date.

(6) Unless the Court otherwise directs, the petition for the appointment of a restructuring officer will be heard within 21 days of the petition being filed in Court.

(7) An office copy of every petition presented under this Rule shall be placed on the Register of Writs and other Originating Process maintained by the Registrar pursuant to GCR Order 63, rule 8.

(8) Every petition under this Rule shall be heard in open court unless the Court directs, for some special reason, that it should be heard in chambers.”

Practical application of the statutory regime

7 In the Company's Written Submissions, the following important argument was advanced:

“ 43. It is respectfully submitted that given that certain of the statutory provisions regarding the appointment of restructuring officers in the Cayman Islands are substantially similar to the statutory provisions previously in force regarding the appointment of provisional liquidators for the purposes of implementing a compromise or arrangement with creditors (or classes thereof) (that is, ‘light touch’ provisional liquidation proceedings), case law authorities in respect of restructuring or ‘light touch’ provisional liquidation are likely to be both relevant and persuasive.”

8 I gratefully adopt those submissions for two principal reasons. Firstly, the grounds upon which a restructuring petition may be presented under section 91B (1) are expressed in the same terms as the grounds for appointing provisional liquidators for restructuring purposes under the former provisions of section 104(3) of the Companies Act (2022 Revision) before the restructuring officer regime became operative on 31 August 2022. The solvency test for restructuring purposes is the same as that applicable to winding-up proceedings as well (section 93 of the Act, “ Definition of Inability to pay debts”). Secondly, and less technically...