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As the Grand Court of the Cayman Islands reopens for 2023, it is a good time to reflect on what transpired in 2022. A review of the filings made in the Grand Court throughout 2022 shows a very significant number of cases concerning large-scale cross-border insolvency and restructuring proceedings, as well as various complex commercial disputes. Statistics from the Grand Court
The Grand Court, which has jurisdiction for civil and criminal matters, has five divisions namely: (1) Financial Services; (2) Family; (3) Criminal; (4) Admiralty; and (5) Civil. As the Cayman Islands continues to be one of the leading jurisdictions in the world for financial services, it is not surprising that the Financial Services Division is the most active, with approximately 332 new proceedings filed in 2022 relating to capital reductions, schemes of arrangement, company restorations, and winding up petitions, to name a few. Additionally, approximately 156 civil cases and 277 Petitions for Divorce and ancillary relief were filed in the Grand Court. The Grand Court had delivered 170 reasoned judgments as at 31 December 2022. When compared to the previous year’s statistics, there was an overall decline in the number of new proceedings filed in the Grand Court in 2022. For example, in 2021, based on available information, there were an additional 54 cases filed in the Financial Services Division, an additional 52 cases filed in the Family Division, and an additional 462 cases filed in the Civil Division. The decline in the number of proceedings initiated in the Grand Court might be due, at least in part, to an increase in the use of alternative dispute resolution options, particularly as this decline coincides with the opening of the Cayman International Mediation and Arbitration Centre (“CI-MAC”) and a new Practice Direction concerning Judicial Mediation. Significant cases handled by Conyers
This year, Conyers attorneys were involved in many of the most complex and novel matters in the jurisdiction at first instance and appellate level, including in relation to:
High-value shareholder disputes (see, for example, In the Matter of Virginia Solution SPC Ltd and In the Matter of Seahawk China Dynamic Fund);
Large-scale cross-border insolvency matters (see, for example, In the Matter of Silver Base Group Holdings Limited and
In the Matter of GTI Holdings Limited);
Complex private client and trusts litigation: (see, for example, MaplesFS Limited v (1) B&B Protector Services Limited (2) PJSC National Bank Trust (3) PJSC Bank OTkritie Financial Corporation and Lea Lilly Perry & Tamar Perry v. Lopag Trust Reg. and others);
Novel applications for the appointment of inspectors (see, for example, In the Matter of BBShares Capital Management Ltd. and In the Matter of Avivo Group);
Recognition and enforcement of foreign arbitral awards (see, for example, In the matter of LAM global Management Ltd II and Qingdao Conson Financial Holdings Co. Ltd et/al. v. Fortune Anchor Limited et.al);
Cross-border debt restructuring assignments (see, for example, In the matter of Atlas Financial Holdings Inc and In the matter of Golden Wheel Tiandi Holdings Company Limited);
Contested supervision applications (see, for example, In the matter of Touradji Private Equity Offshore Fund Ltd et al);
Merger and appraisal actions (see, for example, In the matter of Changyou.com Limited);
High-profile Judicial Review proceedings (see, for example, Kattina M Anglin v The Governor of the Cayman Islands & Colours Caribbean);
Novel confidentiality proceedings (see, for example, In the Matter of Kuwait Ports Authority); and
Conyers also filed the most applications for capital reductions and restructurings by scheme of arrangement of any Cayman Islands law firm. Significant events in 2022
From a Cayman Islands litigation, insolvency and restructuring perspective, there were various notable events in 2022:
Effective from 26 October 2022, Margaret Ramsay-Hale became the first female Chief Justice of the Cayman Islands and is scheduled to hold office until at least April 2031. Chief Justice Ramsay-Hale replaced Sir Anthony Smellie, who had held the position of Chief Justice since June 1998;
The Judicial Committee of the Privy Council (“JCPC”) sat in the Cayman Islands from 15 to 18 November 2022 to hear three separate appeals. This was the first time that the JCPC, normally based in London, sat in an Overseas Territory of the United Kingdom. The judges who sat in the Cayman Islands in November 2022 were all Justices of the UK Supreme Court. As observed by Erik Bodden, Conyers partner and current President of the Cayman Islands Legal Practitioners Association (“CILPA”), "The visit [was] an opportunity for the Cayman Islands legal fraternity to see first-hand our final appellate court at work";
The Legal Services Act (“LSA”), which replaces the Legal Practitioners Act, came into effect on 14 October 2022 paving the way for the establishment of a Legal Advisory Council to regulate legal practice in the Cayman Islands, which is charged with responsibility for legal training and the regulation of the Truman Bodden Law School. The enactment of the LSA will assist in protecting and promoting the reputation of the Cayman Islands as a leading international financial centre. Former Chief Justice Sir Anthony Smellie announced the launch of the Cayman Islands Judicial and Legal Education Institute (“CIJLEI”) in October 2022. The objective of the CIJLEI is the continued promotion of excellence and efficiency in the administration and delivery of justice. The pro bono legal work for establishing the CIJLEI was undertaken by Conyers Partner Robert Lindley. The Cayman Islands Legal Assistance Clinic (“the Clinic”) was formed and represents a cooperative initiative between the Department of Legal Aid (“Legal Aid”), the Cayman Islands Legal Practitioners Association (“CILPA”) and the Truman Bodden Law School. The mandate of the Clinic is to provide greater access to justice for eligible members of the community through the provision of pro bono legal advice and assistance as a complement to the provision of legal services by the local bar and the formal legal aid system;
The Cayman Islands legislature amended the Companies Act to introduce a new restructuring officer regime, which provides financially distressed companies with an alternative to commencing winding-up proceedings. The first restructuring officer appointment was ordered by Kawaley J in November 2022 In the Matter of Oriente Group Limited;
The ‘headcount test’ for members’ schemes of arrangement was abolished. Previously, a members’ scheme of arrangement required a majority in number of at least 75 percent in value of the members (or class of members) present and voting either in person or by proxy at the meeting. The numerosity element of the threshold has been removed by additional amendments to the Companies Act. However, the ‘headcount test’ remains for creditor’s schemes of arrangement;
As mentioned above, with the passing of Practice Direction 3 of 2022 Judicial Mediation Guidelines, the Grand Court has indicated that it intends to refer new matters to judicial mediation in the first instance, where appropriate; and
In a similar vein, as noted above, CI-MAC opened in 2022 to offer efficient and flexible dispute resolution services, and support for arbitration and mediation. Conclusion
As we reflect on the year 2022, we are now looking forward to the year ahead, as we continue to serve both new and existing clients. There were a number of exciting and important legal developments in the jurisdiction in 2022, and we anticipate that the Cayman Islands will go from strength to strength in 2023.

The Grand Court of the Cayman Islands: reflecting on the year 2022

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A Hong Kong court has severely criticised the provisional liquidators (PLs) appointed by the court in the company’s place of incorporation in the Cayman Islands, for trying to interfere with the rights of creditors in Hong Kong and to bypass the statutory scheme of winding-up in Hong Kong. In GTI Holdings Limited [2022] HKCFI 2598, the Honourable Madam Justice Linda Chan said it was a matter of concern to see that solicitors and counsel engaged by the PLs in Hong Kong "did not bring home to the provisional liquidators their duties owed to the creditors and to this court". Winding up here…and there
On 22 November 2021, the Hong Kong court made a winding-up order against the company which was listed on the Hong Kong stock exchange and which carried on financing activities in Hong Kong, finding it "grossly insolvent". The PLs then sought to reverse the findings "through the backdoor" by asking the Cayman court to approve a proposed scheme of arrangement and requesting the Hong Kong court to assist them in carrying out their work in Hong Kong. They did this by engineering an "urgent" hearing and filing two affirmations which Linda Chan J observed contained a number of significant misrepresentations. The company procured a bondholder investor to whom the company owed HK$21.2 million to apply for a regulating order under section 227A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (CWUMPO), the purpose of which the court said was "no more than an attempt to bypass the creditors' statutory rights." The investor funded the work of the PLs and the PLs continued to work with the investor and the directors of the company to "ensure they could remain in office". The PLs sought a hearing of the winding up petition by the Cayman court on 22 February 2022, making representations among other that due notice of the hearing had been given to the creditors and that the Hong Kong court had been notified of the hearing but had not provided a response. On the basis of the representations and submissions, the Cayman court made a winding up order which had the effect of appointing the PLs as joint official liquidators (JOLs) of the company. Linda Chan J said it was clear that significant information had been withheld from the attention of the Cayman judge when he made the order. On 18 March 2022, the JOLs placed an "ex parte Summons" before the Honourable Mr. Justice Harris seeking recognition and assistance, including to take all steps necessary to implement the debt restructuring plan and seeking an urgent hearing. Harris J directed that the Official Receiver should be notified of the application and given the opportunity to state her preliminary views. On 8 April 2022, Harris J informed the parties that in light of the response received from the Official Receiver, the papers had been passed to the court of the main winding-up action. A "complete turn"
Matters then "took a complete turn" with the JOLs no longer asking the court to deal with the application urgently and instead informing the court that they were abandoning the application, as the investor had "decided not to fund the Application due to commercial concerns". What was described as the "complete volte-face" on the part of the JOLs showed "that the JOLs would only pursue the Application if it was heard by their chosen Judge" and outside the main winding-up proceedings. Linda Chan J said it was a "matter of grave concern" that the JOLs had chosen to act in this way. Despite the JOLs' offering to pay the costs of the application, Linda Chan J said it was "for the court to uphold the high standards required of officers of the court". She then went on to remind the parties of the duties of PLs, including the duty to act honestly and to exercise powers bona fide for the purpose for which they are conferred and not for any private or collateral purpose. A liquidator should "at all times act with complete impartiality as between the various persons interested in the property and liabilities of the company". Where liquidators accept appointments on the basis that their remuneration depends on the approval of a funder, there risked the impression that "they had subjected themselves to the control or influence of the funder". The court commented that the JOLs had not disclosed to the court the terms of the funding agreement, illustrating a wider problem, namely where foreign-appointed provisional liquidators/liquidators are given certain powers by the Hong Kong court through a recognition order obtained outside the main winding-up proceedings. Such persons "are able to act as provisional liquidators/liquidators in Hong Kong but are not subject to the supervision and control of the liquidators" under CWUMPO. This was illustrated in the present case, where one of the PLs had ignored the winding-up judgment and "put forward the contrary views and contentions" which the investor and directors wanted him to say – despite these views being misleading or inaccurate. An unnecessary application
The obvious route for the PLs to have pursued, would have been to request the Official Receiver to appoint them as her special managers for the purpose of pursuing the scheme of arrangement. Had the Cayman court been alerted to this possibility, it would have concluded that there was "no justification for the PLs to take the elaborate (and costly) steps of seeking orders from the Cayman court for the purpose of pursuing the Scheme". All the time and costs incurred could have been avoided had the PLs and their legal representatives paid heed to the statutory scheme under CWUMPO. As such, the court took the view that the PLs should not be allowed to recover the costs of the application from the assets of the company. The court went further, saying that in light of the misconduct on the part of the JOLs, this was a case where the court should exercise the discretion to disallow the JOLs' right to receive remuneration and to recover any costs incurred in making the application, as a means of making doubly sure that the JOLs would not look to the assets of the company to pay their costs. Pause for reflection
The decision is noteworthy not only for the criticism of the insolvency practitioners involved, but also for the wider questions to which it alludes in terms of the interplay between the Hong Kong insolvency regime and the laws of offshore jurisdictions. It is another reminder that the Hong Kong courts will carefully examine the viability of proposed restructurings and that the bar is set high, where the interests of the general body of creditors is concerned (see our alert " A magical incantation" – Hong Kong court warns it will carefully examine restructuring viability ").

Hong Kong court issues stunning criticism of provisional liquidators for abusing winding-up procedure

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In the recent judgment In the Matter of GTI Holdings Limited delivered on 15 March 2022 [1] , the Cayman Islands Grand Court reiterated the importance of principles of comity in cross-border insolvency matters and the central function of the place of incorporation. A copy of the full judgment is available here . Background
Winding-up proceedings were filed against GTI Holdings Limited (the “Company”) in both Hong Kong and the Cayman Islands. In May 2020, Conyers were instructed by the Cayman Islands Joint Provisional Liquidators (the “JPLs”) of the Company, who were appointed on a “light touch” basis for restructuring purposes. Importantly, the JPLs also obtained recognition of their appointment in Hong Kong. A series of orders followed in both Hong Kong and the Cayman Islands to facilitate the restructuring process, as progress was being made by the JPLs and the Company. In light of the headway that had been made and due to substantial support from creditors, the Hong Kong Court set a date for a convening hearing to occur in March 2022 to consider the restructuring plan and a proposed scheme of arrangement. However, in November 2021, after the matter was reassigned to a different judge of the Hong Kong Court, a winding-order was made in Hong Kong. This was not expected by the JPLs nor many of the stakeholders for a variety of reasons, not least because the convening hearing had been listed a short time before the winding-up order was made and the Hong Kong Court had recognised the appointment of the JPLs. Accordingly, as a consequence of the winding-up order, the Hong Kong Official Receiver was appointed to act as provisional liquidator in Hong Kong. Meanwhile, the JPLs remained in place in the Cayman Islands with the primary objective of promoting a restructuring. The Cayman Islands position
With the backing of key stakeholders, including the directors of the Company, the JPLs applied for a winding-up order in the Cayman Islands and sought appointment as Joint Official Liquidators in an effort to encourage a consistent approach in the best interests of the creditors and other stakeholders. That application led to the recent judgment of the Grand Court and some helpful observations from Mr. Justice Doyle regarding comity considerations when dealing with parallel proceedings in “foreign friendly jurisdictions” as follows:
“Cayman judges have sensibly had comity concerns at the forefront of their minds when determining issues in proceedings before the Grand Court of the Cayman Islands when there are connected proceedings in foreign friendly jurisdictions such as Hong Kong.”
“It is, of course, entirely a matter for the Hong Kong Court but I express the wish that it gives the JOLs recognition and assistance.”
“… it appears, at least to this court, that it may be more effective and efficient and would plainly save time and avoid duplication if the JOLs this court has appointed were also appointed as liquidators in Hong Kong. This, to my mind at least, would appear to be in the best interests of all creditors but at the end of the day it will be a matter for them to vote upon the position as they see fit and subject to any intervention of the Hong Kong Court.”
Furthermore, the judgment includes a detailed analysis of the prominent and essential role of the place of incorporation in insolvency and/or restructuring proceedings involving international groups. Doyle J made the following points in that regard:
“It is a very serious step for a foreign court to make a winding-up order against a company incorporated under the laws of another jurisdiction … Usually the best and most appropriate way forward is to leave it to the courts of the place of incorporation of the company to deal with applications for winding up orders and to be treated as the courts with primary jurisdiction.”
“I also took into account the fact that a winding up order made by the Hong Kong Court would have limited effect on subsidiaries outside Hong Kong and that an order made by a court in the place of incorporation of the Company should be more effective internationally in accordance with well-established principles of private international law.”
“In the present case, it is to be hoped that the Hong Kong Court would also strive to avoid unnecessary conflict and ensure that the Hong Kong winding up is conducted as ancillary to the principal liquidation of the Company which is incorporated in the Cayman Islands.”
Comment
It is generally accepted that matters concerning the constitution and management of the affairs of a company are best and most effectively determined by the law of the place of its incorporation. This judgment underscores that fundamental principle and emphasises the need for co-operation and consultation between jurisdictions to avoid conflicting outcomes. The Conyers team has been engaged on many of the most significant restructuring assignments in the Cayman Islands. Conyers continues to act for and work alongside Osman Mohammed Arab, Lai Wing Lun (both of RSM Hong Kong) and Owen Walker of R&H Restructuring (Cayman) Ltd in their capacity as JOLs of the Company. [1] FSD 102 of 2020 (DDJ)

Cayman Islands Restructuring: Comity and Reciprocity

03/12/2021 | 04:52am EST
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. GTI HOLDINGS LIMITED
(Provisional Liquidators Appointed)
SANCTION OF SCHEME OF ARRANGEMENT
This announcement is made by GTI Holdings Limited (the "Company") pursuant to Rule 13.09 and Rule 13.25 of the Rules (the "Listing Rules") Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). References are made to the announcements of the Company dated 7 July 2020, 20 August 2020, 27 August 2020, 28 September 2020, 5 November 2020 and 30 December 2020 (collectively, the "Announcements") in relation to, among other things, the hearings for application for directions and sanction of the Scheme of Arrangement. Unless otherwise stated, capitalised terms used herein shall have the meanings as defined in the Announcements. As disclosed in the Announcement dated 30 December 2020, the High Court had given directions on the preparation of the documents in relation to the Scheme of Arrangement in the hearing on 22 December 2020 and the hearing for sanction of the proposed Scheme of Arrangement had been tentatively rescheduled on 12 March 2021. As additional time is required for the Company and the JPLs to finalise the information to be contained in the documents in relation to the Scheme of Arrangement, the Company sought the High Court's leave to re-fix the hearing date for sanction of the proposed Scheme of Arrangement and the High Court has directed that the sanction hearing be re-fixed on 30 June 2021. Further announcement(s) will be made by the Company as and when appropriate in relation to any material development of the Scheme Meeting and the hearing(s) of the Scheme of Arrangement, and in relation to the definitive date and time for the Scheme Meeting. Shareholders and potential investors of the Company should exercise caution when they deal or contemplate dealing in the Company's shares or other securities of the Company. By Order of the Board GTI Holdings Limited
(Provisional Liquidators Appointed)

GTI&nbsp;: UPDATE ON HEARING FOR APPLICATION FOR DIRECTIONS AND SANCTION OF SCHEME OF ARRANGEMENT

09/14
0
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. GTI HOLDINGS LIMITED
(a company incorporated in the Cayman Islands with limited liability)
(Provisional Liquidators Appointed)
UPDATE ON WINDING UP PETITION
This announcement is made by GTI Holdings Limited (the "Company", together with its subsidiaries, the "Group") pursuant to Rule 13.09 and Rule 13.25 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the "SFO"). References are made to the announcements of the Company dated 8 January 2020, 13 January 2020, 5 March 2020, 5 June 2020, 26 June 2020, 13 July 2020, 15 July 2020 and 18 August 2020 (the "Announcement(s)") in relation to, among other things, the winding up petitions filed against the Company. Unless otherwise stated, capitalised terms used herein shall have the same meaning as those defined in the announcement of the Company dated 5 June 2020. The Company would like to provide update on the status of Petition 1 as follow:
As disclosed in the Announcement dated 15 July 2020, the hearing of the Petition 1 was adjourned to 23 September 2020 at 3:00 p.m.. The parties have jointly applied to the High Court of Hong Kong for adjourned of the hearing to a date no earlier than 18 November 2020, and the High Court has on 22 September 2020 instructed that the hearing on 23 September 2020 be vacated and be further adjourned to a date to be informed by the High Court. 1
Further announcement(s) will be made by the Company as and when appropriate in relation to any material development of the Petition 1. Shareholders and potential investors of the Company should exercise caution when they deal or contemplate dealing in the Company's shares or other securities of the Company. By Order of the Board
GTI Holdings Limited

GTI : INSIDE INFORMATION UPDATE ON WINDING UP PETITION

GTI Holdings (03344.HK) specializes in textile manufacturing.

Date	10/5/2005
Round	IPO
Amount
Investors	Public
Valuation	$99M
Revenue	0 FY undefined
Sources	1

Date	2/7/2020
Round	Corporate Minority
Company	Chen Yu Environment Protection
Amount	$15.45M
New?	Yes
Co-Investors
Sources	2

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