‘Soft Touch’ Provisional Liquidators in Bermuda corporate restructuring and insolvency: “Give Peace a Chance”?

On 4 November 2017, Chief Justice Kawaley delivered another judgment, In the Matter of Up Energy Development Group Limited [2016] SC Bda 89 Com.

Up Energy Development Group Limited is incorporated in Bermuda, although listed on the Hong Kong Stock Exchange, with business assets in China and Canada.

It is apparently insolvent, with limited options: (a) raise more capital and pay off its debts; (b) promote a restructuring of its debts through the medium of a Court-sanctioned Scheme of Arrangement; or (c) be wound up, with a view to having its assets realized and its debts paid.

The Company’s delay in addressing its insolvency situation, and engaging with the detail of any proposed restructuring, resulted in various creditors presenting winding up petitions in both Bermuda and Hong Kong.

The Company then sought the adjournment of these winding up petitions in order, belatedly, to promote a restructuring. The adjournment was opposed by the Petitioning Creditor.

The Court was only willing to agree to a further adjournment for restructuring purposes if independent Provisional Liquidators were appointed by the Court, for the purpose of supervising management and reporting to the Court and to the creditors.

The Company opposed the appointment of Provisional Liquidators – but lost the argument on this issue (by a judgment which is the subject of a previous Blogpost).

The Judge then invited further argument as to the identity of the Provisional Liquidators.

The Petitioning Creditor proposed various accountants whom they perceived to be independent and suitable for appointment, both in Bermuda and in Hong Kong.

The Company proposed various accountants whom they had already retained as restructuring consultants prior to the Court’s Order, but after the winding up petitions had been presented.

In the end, with a view to balancing (a) the appearance of fairness and independence, and (b) the potential benefits of avoiding unnecessary duplication and wasted expenditure, the Judge appointed the creditors’ proposed appointee in Bermuda, to act jointly with the Company’s proposed appointees in Hong Kong, with some suggestions as to how the office-holders might try to divide their labour, and ‘get along’ with each other, with the Court, with the various creditors, and with the Company.

Since there is not much evidence of the parties having ‘got along’ with each other to date, it remains to be seen whether there is any prospect of them doing so going forwards (as the Judge hopes and advises), or whether the Company and its stakeholders will suffer not only the misfortune of an insolvent liquidation at the end of the day, but the additional misfortune of an extremely expensive and ultimately unsuccessful attempt at a restructuring in the interim.

In the meantime, “Give Peace a Chance”.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s