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Ocean Sino Ltd – BVI Court of Appeal pulls up the handbrake on just & equitable petitions

Traditionally, in cases such Aris Multi-Strategy Lending Fund Ltd v Quantek Opportunity Fund Ltd, the BVI Courts have been reluctant to wind-up companies on the basis of their operational function.

However, as part of the Pacific Andes litigation, in Parkmond Group Limited (in liquidation) v Richtown Development Limited (in liquidation) (decided in 2017), Justice Kaye acceded to an application on just and equitable grounds on the basis that the directors ought to have been able to provide books and records pursuant to section 98 of the Business Companies Act 2004 particularly in light of allegations of fraud that had been circulating for several years concerning the company. The winding-up petition was based on three grounds, cash-flow and balance sheet insolvency as well as just and equitable grounds. The applicants were able to show that the company was insolvent on both insolvency tests. The Court then went further to consider the failure of the company’s directors to provide accounts which provided the basis for a winding-up on just and equitable grounds.

Similarly, in Re Green Elite Ltd (decided in 2018), the BVI Court of Appeal overruled the first instance judge and held that there was a loss of substratum sufficient to merit a winding on just and equitable grounds in circumstances where the purpose of the company (to hold shares for an IPO) had been exhausted.

However in the recent case of Re Ocean Sino Ltd (January 2020), the BVI Court of Appeal appears to have reverted to tradition and overruled Justice Kaye’s decision to place the company into liquidation on just and equitable grounds. Ocean Sino is the BVI holding company for a Hong Kong based endeavour involved in the ownership and chartering of ships. The Court of Appeal reiterated that a winding up petition was not to be resorted to merely because of dissension within a company. Further since the company’s constitution, articles and memorandum provided for an exit for a shareholder in the event of deadlock, there could not reasonably have been a finding of deadlock sufficient to satisfy the making of a winding up order on the just and equitable grounds. It remains to be seen what the Privy Council’s view will be on this case.

Ocean Sino Ltd – BVI Court of Appeal pulls up the handbrake on just & equitable petitions

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