McMillan J
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Cause No.：FSD 232 of 2018(RMJ)
IN THE MATTER OF SECTION 131 OF THE COMPANIES LAW (2018 REVISION)
AND IN THE MATTER OF ASIA PRIVATE CREDIT FUND LIMITED(IN
VOLUNTARY LIQUIDATION)
IN CHAMBERS
Appearances：
Mr. Chris Keefe and Ms. Gemma Cowan of Walkers for The Public
Institution for Social Security for the State of Kuwait
Mr. Marc Kish and Mr. Shaun Maloney of Ogier for Adamas Global
Alternative Investment Management Inc.
Mr. Sam Dawson and Mr. Denis Olarou of Carey Olsen for the Joint
Voluntary Liquidators of Asia Private Credit Fund Limited
Before：
The Hon. Mr. Justice Robin McMillan
Heard in
Chambers：
27 February 2019
Judgment
Delivered：
19 March 2019
HEADNOTE
The scope of section 131 of the Companies Law - The wide discretion of the Court - The
ance of the absence of a
unstipulated t
impoe independiCourt - Theest of neces
der secti absity
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JUDGMENT
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Introduction
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1.
This matter arises from a Petition dated 18 December by the Public Institution for Social
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Security for the State of Kuwait (“the Petitioner”). The Petition seeks the continuation of
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the voluntary liquidation of Asia Private Credit Fund Limited (“the Company”) under the
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supervision of the Court and the appointment of Mr. David Griffin and Mr. John
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Batchelor as Joint Official Liquidators (“JOLs”) of the Company.
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2.
The current Joint Voluntary Liquidators (“JVLs”) are Mr. Russell Smith and Mr. Kenneth
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3.
The Petitioner between 2010 and 2014 had made a number of cash subscriptions and one
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in specie subscription for shares in the Company totaling US $106， 478， 634.39.
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4.
A restructuring took place in 2014 and since 2014 the net asset value of the shares had
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deteriorated significantly such that as of 31 March 2018 the Petitioner’s shareholding in
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the Company was worth approximately U.S $37， 208， 691.88.
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5.
The Company was incorporated in the Cayman Islands on 9 February 2010 as an
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exempted limited company under the Companies Law (as Amended) (“the Law”)
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carrying on business as a mutual fund.
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6.
The Company has been managed by Adamas Global Alternative Investment Inc (“the
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Manager”), also incorporated as an exempted limited company under the Law.
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7.
As the Court understands the position， the Petitioner is now the sole investor in the
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Company and since 2017 the sole participating shareholder. Meanwhile the Manager has
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10 shares exangements
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2019 the
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On 27 February Court or
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27 January 2019 the Court granted the Petition that the voluntary winding up of the
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Company which was approved by the Manager on 14 December 2018 should continue
under the supervision of the Court.
190319 In the Matter of Asia Private Credit Fund Limited-FSD 232 of 2018 Judgment (RMJ)
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However, the Court also directed that one of the existing JVLs, Mr. Yeo, should continue
in office as JOL along with one further appointee as identified and proposed by
the Petitioner with the concurrence of Court.
10.
The Court does not intend to set out in full the detailed background to this matter, the
evidence adduced and relied upon by the parties nor the Written Submissions of the
parties.
11.
More narrowly, this Judgment concerns the scope and application of section 131 of the
Law, upon which the Petitioner has relied.
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Section 131 of the Companies Law
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Section 131 states:
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“131. When a resolution has been passed by a company to wind up voluntarily, the
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liquidator or any contributory or creditor may apply to the Court for an order for
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the continuation of the winding up under the supervision of the Court,
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notwithstanding that the declaration of solvency has been made in accordance
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with section 124, on the grounds that-
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(a) the company is or is likely to become insolvent; or
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(b) the supervision of the Court will facilitate a more effective, economic or
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expeditious liquidation of the company in the interests of the contributories and
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creditors.”
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In considering whether to make such an Order, it is for the Court alone to decide whether
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the supervision of the Court will facilitate a more effective, economic or expeditious
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liquidation of a company in the interests of the contributories and creditors. In other
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words, facile broadly
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naking the c actual reasons for ex
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vitating the express
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A general indication as to how the provision should be interpreted is provided in In the
Matter of Exten Investment Fund (Unreported Grand Court)， Cause Nos FSD 96-99 of
2017， where Mangatal J. states at paragraph 64：
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“As Megarry J indicated in the Test Holdings decision， the word “creditor” has， in
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relation to other statutory provisions， been construed widely so as to include a mere
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contingent creditor. There is nothing in the language of section 131(b) to suggest that a
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more limited construction should be put on the word “creditor”. Indeed， the language of
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sub-section (b) is wide， and states that the application can be made where supervision of
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the Court will facilitate a more effective， economic or expeditious liquidation of the
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company in the interests of contributories or creditors.”
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15.
The reference to the language of sub-section 131(b) being “wide” is both instructive and
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helpful. It emphasizes that the approach of the Court should be broad and purposive.
The Legal Submissions
16.
Notwithstanding these considerations both the Petitioner and the Manager favour
narrower but differing constructions.
17.
The Petitioner in its Written Submissions dated 22 February 2018 points out that the
wording of section 131 appears to be unique to the Cayman Islands (paragraph 9).
Reference is also made to the local Law being derived from the English Companies Act
1862.
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In this regard， the Court notes that under that former legislation the jurisdiction and the
discretion oto grant a ser were expr
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of the Court upervision extremely wi
ordde and
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approving Joint Official Liquidators the Petitioner’s views should carry considerable
weight.
190319 In the Matter of Asia Private Credit Fund Limited-FSD 232 of 2018 Judgment (RMI)
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20.
Indeed in Deloitte & Touche A.G. v. Johnson and Dinan [1999] CILR 297 at page 303, lines 30-45, it is stated that the Court must consider "the general advantage of the persons interested in the liquidation" and that the Courts have consistently regarded the creditors and the contributories as the proper persons to make the application, "being the only persons interested in the liquidation."
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The Petitioner then develops the point to state at paragraph 17 that it is the Petitioner, and only the Petitioner, that has an economic interest in the liquidation of the Company, bearing in mind the poor financial performance of the Company and its underlying investments. The Petitioner also submits that in these circumstances its views should carry substantial weight as regards the identity of the JOLs.
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While the Court fully recognises the weight of these collective submissions nonetheless the Court reminds itself of its responsibility to act in an independent and impartial manner as distinct from exercising a more passive acquiescence, as is perhaps unintentionally implied.
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The Manager in contrast submits at paragraph 4 of its Written Submissions dated 22 February 2019 that the current JVLs already have all the tools which they need to make inquiries of the Manager and other service providers and, if they consider it appropriate in due course, to apply for a supervision order.
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The Manager proceeds to describe the wording of section 131 as setting out a "test". The Court does not there is s such. The Court's discretion must of course be guided by what is a test. A, the Court's discretion is not defined simply as the ambit of the discretion, but indicated's jurisdiction is not activated upon the relevant grounds is wide rather than narrow. This approach is fully consistent with the guidance of Mangatal J.
190319 In the Matter of Asia Private Credit Fund Limited - FSD 232 of 2018 Judgment (RMJ)
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25.
The Manager submits that the burden rests on the Petitioner to demonstrate that
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supervision of the Court would enable the liquidation to be conducted in a more effective,
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economic and expeditious manner in the interests of the contributories and creditors
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(paragraph 24).
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26.
Complaint is made at paragraph 25 of the potential for the prejudicial effect a supervision
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order may have on the interests of all stakeholders in a listed company. This is of course a
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factor for discretionary consideration.
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27.
The Manager then redefines the legal issue by stating that for the present application to
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succeed the Petitioner “must demonstrate that supervision is necessary”. This proposition
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is entirely misconceived. Necessity is not a requirement for section 131 to be activated,
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and to describe the question in this manner, with great respect, could be seriously
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misleading.
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28.
The Manager further alleges that the present dispute is ultimately not about a justifiable
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need for supervision but about a desire to replace the current JVLs.
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29.
The JVLs themselves have also provided Written Submissions, adopting however a
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neutral position as to the Petition.
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Conclusion
Both the and the We e scope ag
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he Court hed carefully Ma ns as to und their posis
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of section 13 Petitioner is conten the overstatatio
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las consider y the vanto meaning
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the Court has made clear the powers of the Court are not to be exercised only at the
direction of the Petitioner without further analysis.
190319 In the Matter of Asia Private Credit Fund Limited-FSD 232 of 2018 Judgment (RMJ)
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31.
The Court is satisfied that the grounds for the exercise of its discretion under section 131
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have been amply made out.
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32.
In these circumstances where a contributory has suffered a very significant loss of its
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original investment, it is particularly important in the interests of justice and in order to
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maintain the reputation and standing of this jurisdiction that supervision should be
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ordered. At the same time, this decision is no reflection whatever on the professional
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standing and proficiency of the current JVLs, who have acted entirely impeccably.
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33.
Equally it is inappropriate to replace both of these JVLs with the Petitioner's nominees,
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given the serious loss of knowledge and expertise that this replacement would represent.
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A party who seeks the intervention of the Court will if it is successful then have to accept
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the consequence of that success. It is necessarily the Court which conducts the
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supervision and not the Petitioner or the Manager.
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Robin McMillan
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THE HON. MR. JUSTICE MCMILLAN
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JUDGE OF THE GRAND COURT