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Cayman company gets Chapter 15 protection in the US

22 February 2010


Harneys has welcomed the recent decision by the United States Bankruptcy Court for the District of Delaware to recognise the liquidation of Cayman company, Saad Investments Finance Company (No5) Limited, (SIFCO5), an SPV established to operate as an investment company, as a “foreign main proceeding” under Chapter 15 of the United States Bankruptcy Code.
Recognition of the liquidation as foreign main proceedings provides for an automatic stay of proceedings with respect to any assets of SIFCO5 within the United States, amongst other things.
The decision is significant because it represents a clear departure from the approach of the Bankruptcy Court for the Southern District of New York, when refusing such recognition in the prominent cases of Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd,Basis Yield Alpha Fund (Master).
The Delaware Court’s decision in SIFCO5 provides some welcome relief to the liquidators of offshore companies with valuable assets situated in the United States. Prior to the decision those liquidators may have considered that, following the approach of the New York Courts, recognition was effectively barred and expensive chapter 7 or 11 proceedings were the only other options. Recognition of SIFCO5 proves that this is not the case and that Chapter 15 recognition is available in the United States in appropriate cases
Harneys acted as counsel to the liquidators of SIFCO5, Kinetic Partners (Cayman) Limited, and worked hand in hand with Kinetic’s US Counsel, Schulte Roth & Zabel LLP. Harneys was closely involved with the preparation for the various hearings in the Delaware Court to obtain recognition.