In its January 2022 decision of In the matter of Evergreen International Holdings Limited,  the Grand Court of the Cayman Islands (the Court) ordered the immediate winding up of Evergreen International Holdings Limited. Evergreen is a Cayman Islands holding company listed on the Hong Kong Stock Exchange that operates a manufacturing and retail clothing business through its subsidiaries in both Mainland PRC and Hong Kong SAR. In making an immediate winding up order, the Court refused Evergreen's last-minute application to appoint restructuring provisional liquidators and adjourn the winding up petition on the basis that there was insufficient evidence before the Court to demonstrate that the restructuring was viable or in the best interests of creditors.
The petitioner originally acted as Evergreen's placing agent for two bond issues and was the registered holder of some of the bonds. In 2019 and 2021, Evergreen defaulted on both interest and principal payments due on the bonds held by the petitioner. The amounts due were not fully repaid and, in September 2021, the petitioner served a statutory demand on Evergreen for HK$67 million. Evergreen failed to comply with the statutory demand and, in December 2021, the petitioner presented a winding up petition against Evergreen on the ground that it was unable to pay its debts as and when they fall due.
Evergreen did not dispute that the debt to the petitioner was owing, but instead (on the eve of the hearing of the winding up petition) applied to appoint provisional liquidators and adjourn the winding up petition so that it could explore the possibility of restructuring its debts. The application was made on the basis that Evergreen was balance sheet solvent, and had valuable real estate assets in the PRC that could be sold to pay its debts and return Evergreen to trading profitably.
The petitioner opposed Evergreen's application and sought an immediate winding up order on the basis that Evergreen was cash flow insolvent, and further that:
The Court started with the well-settled principle that a creditor is entitled to a winding up order if the Court is satisfied that the company is unable to pay its debts, unless there are special reasons not to make a winding up order.  Any adjournment of a winding up petition must have a "rational basis", and the burden is on the insolvent company to persuade the Court not to make a winding up order. 
The Court considered the three broad categories where the Court has exercised its discretion to adjourn a winding up petition:
In relation to the first category of cases, an adjournment is more likely to be granted where (a) it is supported by a majority of creditors, the proposed joint provisional liquidators and/or the relevant listing authority (if applicable) and (b) the company has taken proactive restructuring steps. 
In this case, Evergreen failed to persuade the Court that there was a rational basis for adjourning the winding up petition. Instead, the Court concluded that Evergreen's application was a last minute attempt to avoid a winding up order (of which the Court should be wary) and observed that:
The issue of whether to order an immediate winding up or instead adjourn a petition for the purpose of appointing restructuring provisional liquidators is typically fact specific, and involves the Court exercising a wide discretion. Caution should therefore be exercised before placing too much weight on individual decisions. However, Evergreen builds on a consistent thread running through the cases: while the Cayman Court remains willing to support genuine efforts by companies to restructure, when an insolvent company fails to be proactive and take tangible steps for a restructuring in the face of undisputed creditor claims, the Court will enforce the creditors' rights to an immediate winding up order.  We expect that this approach to balancing the interests of both creditors and companies will continue following the introduction of Cayman's new restructuring regime in the coming year.
Ogier acted for the successful petitioner in this matter.
 (FSD 349 of 2021 (MRHJ), unreported, 11 January 2022).
 Re Lummus Agricultural Services Ltd  1 BCLC 137 and 141; Re Sun Cheong Creative Development Holdings Limited (FSD 169 of 2020 (ASCJ), unreported, 26 September 2020).
 Re ACL Asean Tower Holdco Limited (FSD 171 of 2018 (IKJ), unreported, 8 March 2019).
 See, eg, Re Sun Cheong.
 See, eg, Re Minrealm  2 BCLC 141 and Byblos Bank SAL v Al-Khudhairy  BCLC 232.
 ACL Asean .
 For more information, read our briefing Recent trends: provisional liquidation in the Cayman Islands
Sign up to receive updates and newsletters from us.Sign up
No Content Set