Cayman Grand Court outlines relevant considerations for the appointment of provisional liquidators under section 104(3) of the Companies Act

The Grand Court of the Cayman Islands has provided helpful guidance to the relevant considerations for the Court on the use of section 104(3) of the Cayman Companies Act (2025 Revision).  

Section 104(3) allows the Court to appoint provisional liquidators if it considers it "appropriate to do so" and was historically used to facilitate the appointment of provisional liquidators for the purposes of restructuring a company.  

However, after the introduction of the restructuring officer regime in August 2022, the provision was amended to include broader wording, leaving some uncertainty as to the scope of the Court's power. 

The appointment of provisional liquidators vs restructuring officers 

In a number of recent decisions - most notably in the case of Re Kingkey Financial International (Holdings) Limited (Unreported, Asif J, 19 April 2024) - the Grand Court has ordered the appointment a provisional liquidator for the purposes of restructuring, despite the recent introduction of the restructuring officer regime. 

These applications have generally been made on the basis that a section 104(3) appointment may confer broader powers on a provisional liquidator than those available to a restructuring officer. For example, a provisional liquidator may displace the powers of the board of directors, as seen in Re Oakwise Value Fund SPC and Re New Horizon Health Limited.  

By contrast, in the recent decision of Asia Television Holdings Limited [2025] CIGC (FSD) 104 (Asia Television) the Court refused an application to appoint joint provisional liquidators under section 104(3) and has confirmed the considerations to which the Court will have regard in determining an application under section 104(3), providing guidance on when a court may decide that it is not appropriate to make an appointment. 

Asia Television: the application for appointment of provisional liquidators in the context of a board dispute 

Asia Television involved a Cayman-incorporated company in significant financial distress, whose centre of main interests (COMI) was in Hong Kong. There was a significant dispute between two factions of shareholders as to the properly appointed board of directors of the company. There were also several proceedings on foot before the Hong Kong Court, including  

• a proceeding seeking to resolve whether the current board of the company had been validly removed at an extraordinary general meeting

• a separate creditors' winding up petition against the company 

The purported board of the company presented a winding up petition and a summons for the appointment of provisional liquidators, which they sought to be heard on an urgent basis. Although the company's application was supported by numerous letters from creditors, there was no actual restructuring proposal before the court.  

At the hearing, the summons was opposed by one of the creditors and one of the shareholders. 

The Court's consideration of its jurisdiction for appointment of provisional liquidators under s104(3) of the Companies Act  

Asif J ultimately declined to appoint provisional liquidators, finding that it was not appropriate to do so on the facts. In coming to this conclusion, he considered the breadth of the Court's jurisdiction under s104(3): 

1. Asif J drew "useful assistance" from Re Sun Cheong Creative Development Holdings Limited [2020] 2 CILR 942, in which Smellie CJ (as he then was) had outlined the broad discretion afforded to the Court under the former language of section 104(3). Asif J considered that despite the fact that Smellie CJ was considering the old section 104(3) in that passage he said that: "I consider that those comments regarding the broad and flexible nature of the discretion and the factors to which the court may give weight continue to apply with equal force to the proper interpretation of the new section 104(3), where the statute is expressed in broad terms, simply requiring that the court considers the appointment of a provisional liquidator to be “appropriate”

2. Asif J confirmed that the list of factors to be considered by the Court is not closed, but some of the factors that are likely to be of significance in most cases (as set out in Sun Cheong) include: (i) the express wishes of creditors; (ii) whether the refinancing is likely to be more beneficial than a winding-up order; (iii) that there is a real prospect of refinancing and/or a sale as a going concern being effected for the benefit of the general body of the creditors; and (iv) the considered views of the board as to the best way forward

3. Asif J acknowledged that the Court may be willing, as it was in Midway Resources International (unreported, 30 March 2021), to appoint provisional liquidators even where there are potential challenges to the success of the proposed restructuring. However, Asif J noted that Segal J in Midway described the restructuring plan in that case as being “coherent” and having “a rational basis”

4. Asif J left open the question of whether an appointment under section 104(3) could provide provisional liquidators with "full powers" as are usually granted for appointments under section 104(2) in the context of misconduct, oppression or dissipation of assets 

The Court's ultimate conclusions on jurisdiction under section 104(3)  

On the facts of the case before him, Asif J also found that: 

1. On the question of standing, Asif J did not consider it had to resolve the question of whether the current board was validly removed, and the company only had to meet an "arguability" test on the question of whether the current board had authority

2. Asif J was not satisfied that there was any "real concrete" restructuring proposal. The creditor letters simply referred to supporting the appointment of an unspecified independent officeholder and did not refer to any actual restructuring proposal. Moreover, there was evidence that unsuccessful attempts had been made to restructure the company months before the application was filed and the evidence suggested that discussions with creditors about restructuring had stalled 

3. Asif J acknowledged that there was a background of internal dispute within the company (including over whether the current board had been validly removed), which was one of the reasons for the appointment of provisional liquidators in Kingkey. However, his Lordship distinguished this case given there were ongoing proceedings in Hong Kong to resolve the question of the current board's authority. Asif J questioned whether the application had been made to obtain some strategic benefit in the ongoing Hong Kong litigation, particularly given it was brought before the Court to be determined on an urgent basis before the hearing of the Hong Kong dispute over the current board's authority

4. Asif J had regard to the Hong Kong decision of Harris J in Re Silver Base Group Holdings Ltd [2022] HKCFI 2386 and considered that there may be little utility in appointing provisional liquidators in circumstances where the COMI of the company was in Hong Kong and a winding up petition was already on foot in that jurisdiction. There was therefore "real uncertainty" regarding the possibility of the Hong Kong Court recognising provisional liquidators appointed by the Cayman Court

5. Asif J considered that there was an issue of comity given the other ongoing proceedings in Hong Kong and that it made more sense for any application to restructure the company to occur in Hong Kong. However, his Lordship emphasised that comity was not a determinative factor as the Cayman Court had its own jurisdiction to exercise even if it may not be appreciated by the courts in order jurisdictions 

Conclusion 

In Asia Television, the Court confirmed that section 104(3) remains available for companies seeking to restructure and that, in appropriate cases, it may confer broader powers on the provisional liquidators than the powers available to restructuring officers. 

The decision provides useful guidance to insolvent companies, boards and creditors as to some of the factors the Court will consider upon an application for such an appointment. Applicants seeking the appointment of joint provisional liquidators must demonstrate to the Court that there is a restructuring proposal which is coherent and there is a rational basis for accepting the proposal. In addition, the Court also acknowledged that such an appointment may not be appropriate in cases where there are real questions regarding the prospects of recognition by the foreign court in the company's COMI, particularly where there are existing proceedings before that court. 

Ogier acted for the successful objector parties in this case. 

How Ogier can help 

Ogier has one of the largest Dispute Resolution teams in our jurisdictions, advising on technical, strategic and procedural aspects across the spectrum of contentious commercial issues and disputes. Our restructuring and insolvency experts bring their creativity, knowledge and experience to provide a practical perspective on rapidly evolving cross-border assignments.  

For further insights or tailored legal advice on the rights of creditors, boards of directors and insolvent companies under section 104(3), please contact Ogier’s Dispute Resolution team. 

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This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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