No jurisdiction to wind up a company ex parte: Cayman Court of Appeal rules in latest PetroSaudi judgment

The Cayman Islands Court of Appeal (Court of Appeal) has confirmed that there is no jurisdiction to wind up a company on an ex parte basis, setting aside a winding up order made without notice as a nullity.

The Court of Appeal also significantly restricted the circumstances in which an unliquidated fraud or tort claimant can petition as a contingent creditor. The decision is an important restatement of the limits of the Court's winding up jurisdiction and the statutory safeguards governing creditor petitions.  

This article examines the Court of Appeal's decision and the balance between creditors' rights and the protections afforded to companies facing winding up proceedings.

Case background: PetroSaudi and 1MDB litigation

The dispute is the latest offshore chapter of the 1Malaysia Development Berhad (1MDB) scandal. The Cayman Islands Court of Appeal's decision in Re Petrosaudi International (In Official Liquidation) [2026] CICA (Civ) 14 concerned the PetroSaudi group, which was headed by PetroSaudi International Ltd (PSIL). PSIL owned PetroSaudi Holdings (Cayman) Limited, which in turn owned PetroSaudi International (PSI), the Cayman company at the centre of the winding up proceedings. PSI had a number of subsidiaries beneath it. PSI’s ultimate beneficial owner, Tarek Obaid, was convicted by the Swiss Federal Court on 28 August 2024 of embezzling US$1.8 billion from the Malaysian sovereign wealth fund 1MDB. He was sentenced to seven years’ imprisonment and ordered to pay civil damages of US$1.748 billion. Obaid’s conviction is under appeal and remains suspended.

The Cayman appeal arose from a winding up petition presented against PSI by the Official Liquidator of Bridge Global Absolute Return Fund SPC (Bridge Global). Bridge Global claimed to be a contingent creditor of PSI in respect of losses alleged to exceed US$1.83 billion. Bridge Global asserted contingent claims for breach of contract, breach of trust, dishonest assistance, knowing receipt, unlawful means conspiracy and unjust enrichment arising out of transactions connected with the 1MDB fraud, and contended that those claims were sufficient to confer standing as a contingent creditor under section 94(1)(b) of the Companies Act.

On 6 May 2025, Kawaley J made a final winding up order against PSI, on the basis of Bridge Global's petition as a contingent creditor, on an ex parte basis. The order followed a series of directions which were made, including orders dispensing with service of the petition, dispensing with advertisement, sealing the proceedings, appointing joint provisional liquidators and directing that the petition be determined administratively on the papers without an oral hearing.

PSI's founder, Tarek Obaid, challenged the order. Although Doyle J at an inter partes hearing subsequently refused to set aside the winding up order, Obaid appealed to the Court of Appeal.

Jurisdiction of the Cayman Court to wind up a company

The Court of Appeal held that the Cayman insolvency regime contains an exhaustive set of procedural requirements that leave no room for an implied power to wind up a company without notice. Kawaley J's order of 6 May 2025 was therefore made without jurisdiction and was void from the outset. 

The Companies Winding Up Rules O.3 r.5(3) in particular requires that every creditor’s petition “shall be served upon the company” at its registered office immediately after presentation, and those mandatory service provisions take precedence over the general provisions of the Grand Court Rules. Critically, GCR O.9 r.4(3) “provides a discretion only as to when service is to be effected and not as to whether service can be entirely dispensed with”.

Standing of contingent creditors to present a winding up petition

The Court of Appeal held that Re GFN Corporation [2009] CILR 650 remains the governing authority on petitions founded on debts that are bona fide disputed on substantial grounds, notwithstanding the amendment to section 94(1)(b) expressly extending standing to contingent and prospective creditors. In GFN Corporation, the Court of Appeal confirmed that while a contingent creditor has standing to present a winding up petition, the Court must first be satisfied that the petitioner is a creditor on the balance of the probabilities (and not merely that they have a prima facie case for winding up).

On the meaning of “contingent creditor”, the Court of Appeal approved the definition of Pennycuick J in Re William Hockley [1962] 1 WLR 555; a person towards whom, under an existing obligation, the company may or will become subject to a liability upon the happening of a future event. That existing, accrued legal obligation is fundamental.

The Court of Appeal rejected the argument that a general legal duty not to cause loss to others suffices, warning that otherwise “putative petitioners with shadowy claims to be creditors could out-flank” the requirement to demonstrate a presently enforceable debt. The Court of Appeal further noted the New South Wales Court of Appeal decision in Treadtel v Cocco [2016] NSWCA 360, requiring that the obligation be capable of “being viewed with a high degree of assurance as a source of financial liability”, and held that bare tort claims disputed on substantial grounds do not confer standing.

In doing so, the Court held that Kawaley J in Re Atom Holdings, and Doyle J in Aubit International, had erred in equating standing to petition under section 94 with the ability to prove in the liquidation under section 139. The two provisions serve distinct purposes: section 94 governs who may invoke the winding up jurisdiction, whereas section 139 governs which claims may be admitted to proof once that jurisdiction has been engaged.

The need for investigation as a freestanding ground for a winding up order

The need for an investigation into the affairs of a company as a freestanding ground for winding up was confirmed but confined. Drawing on the Privy Council’s flexible approach in Aquapoint LP v Xiaohu Fan [2025] UKPC 56, the Court of Appeal confirmed that a company may be wound up on the just and equitable ground where there is cogent evidence that an investigation would benefit unsecured creditors. However, that jurisdiction cannot be used to overcome a lack of standing or to be used to determine whether the petitioner might have a claim against the company. 

Balancing creditor rights and company protections

PetroSaudi recalibrates the balance between creditors' rights and the protections afforded to companies facing winding up proceedings. It is clear that creditors cannot rely on disputed and unliquidated fraud or tort claims alone to access the winding up jurisdiction, while companies have the benefit of clear appellate authority that the statutory safeguards governing creditor petitions must be observed and cannot be circumvented. 

The decision brings welcome certainty to both the standing requirements under section 94 and the procedural framework for creditor petitions, whilst confirming that the Court's just and equitable jurisdiction remains available where a winding up would facilitate an investigation for the benefit of creditors. 

How Ogier can help

Ogier has one of the largest Dispute Resolution teams in the Cayman Islands, advising on technical, strategic and procedural aspects across the spectrum of contentious commercial issues and disputes. For more information on this topic or to find out how the firm can advise you in this area, contact your usual Ogier contact or one of the authors of this article.

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