Vol 14 (2017) - Issue 4

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When Can a Company Appoint Restructuring Joint Provisional Liquidators in the Cayman Islands?

Introduction
In In the Matter of CHC Group Ltd, unreported, 24 January 2017, McMillan J. sitting in the Grand Court of the Cayman Islands granted an application brought by the directors of CHC Group Ltd (the 'Company') purportedly on behalf of the Company to appoint joint provisional liquidators for the purpose of presenting a compromise or arrangement to the Company’s creditors in circumstances where the Company was or was likely to become unable to pay its debts.
The decision – which resulted from an uncontested hearing – is notable in its apparent expansion of the circumstances in which Cayman’s restructuring regime can be accessed, an area which has been the subject of some considerable focus following the landmark decision of In the Matter of China Shanshui Group Limited [2015] (2) CILR 255.

Facts
The Company was incorporated on 3 July 2008 as an exempted company with limited liability under the laws of the Cayman Islands. It is a holding company of a group of companies engaged globally in the business of helicopter flights, maintenance, repair and overhaul operations and is one of the World’s largest commercial helicopter services groups of companies servicing the offshore oil and gas industry (the 'Group').
On 9 January 2017, CHC Helicopter SA, an indirect wholly-owned subsidiary of the Company (the 'Petitioner') petitioned the Grand Court to wind up the Company for an unpaid inter-company debt arising from a loan agreement in the sum of US$25,595,979 (the 'Petition'). The Petition was filed on the insolvency ground: the Company was alleged to be unable to pay its debts as they fell due within the meaning of s.93 of the Companies Law (2016 Revision) (the 'Law'), and further, or in the alternative, that it was just and equitable in all the circumstances that the Company should be wound up.
The Petitioner’s stated reason for presenting the Petition, however, was in order to facilitate a cross-border restructuring of 43 companies within the Group. As part of that restructuring, the Company intended to apply to the Grand Court for the appointment of joint provisional liquidators ('JPLs') as a pre-cursor to further applications to the Grand Court for orders in support of existing reorganisation proceedings in the US Bankruptcy Court for the Northern District of Texas pursuant to Chapter 11 of the US Bankruptcy Code.
On 10 January 2017 – the day after the Petition was filed – the Grand Court heard an ex-parte application brought by the directors of the Company purportedly on behalf of the Company pursuant to s.104(3) of the Law, for the appointment of JPLs on the grounds that the Company: (a) is or is likely to become unable to pay its debts; and (b) the Company intends to present a compromise or arrangement to its creditors (the ‘Restructuring Application’). As noted by McMillan J., the Restructuring Application was unsupported by a shareholders’ resolution nor was it expressly authorised by the Company’s Articles of Association.