Vol 21 (2024) - Issue 3

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Can a Noteholder Petition to Wind up the Issuer: Contingent Creditor or Contingent Standing?

Synopsis
Last year, the Courts in the Cayman Islands, the British Virgin Islands and Hong Kong were asked to consider the question of whether the ultimate beneficial owner of US law governed notes has standing to petition for the winding up of the issuer of the notes on the basis that they are a contingent creditor. Whilst the Grand Court of the Cayman Islands and the Hong Kong Court of First Instance both determined that a bondholder did not have standing to petition, the BVI Court took a different approach and found that the petitioner was a contingent creditor with standing to seek the winding up of the issuer.
This article considers the approach in each of these cases and outlines the nuances which led the Courts to reach different outcomes as to whether the petitioning noteholder had standing as a contingent creditor. The article notes that although there is some helpful guidance for noteholders, bondholders and issuers from these decisions, until there is appellate authority dealing with the question it remains unclear whether an ultimate beneficial noteholder is a contingent creditor of the issuer or merely has contingent standing to become a creditor.