Cayman Court appointed liquidators are officers of the court; they must be professional insolvency practitioners; and they must act independently in the best interests of those with the economic interest in the liquidation (being the shareholders in a solvent liquidation and the creditors in an insolvent liquidation).
The identity of the practitioners being appointed is usually uncontroversial; most of the instances where a challenge is brought concern allegations of actual lack of independence. However apparent lack of independence is just as important. The Cayman Court is vigilant to ensure not only actual independence, but also the appearance of independence; not least because of the need to maintain confidence in those whom the Court appoints.
Where a significant stakeholder objects to the appointment of proposed liquidators, the Court will give considerable weight to its views, if rational, held in good faith and on reasonable grounds; but no stakeholder can dictate who the Court should appoint.
Where an objection is based on a prior involvement or relationship with the company in liquidation, the prior relationship or involvement may be an advantage in some cases, in terms of saving costs and time; in others, it may be a disqualification. These matters were recently considered at length by the Grand Court in Re Global Fidelity Bank Ltd, in which Justice Doyle considers previous Cayman, English and Isle of Man decisions, and adopts the three stage test formulated in the 2013 Cayman case of Re Hadar Fund Ltd: This is that the Court must:
- Identify the facts of the prior relationship or involvement
- Determine whether its existence is capable of impairing the appearance of independence and if so,
- Determine if it is sufficiently material to the liquidation that a fair minded stakeholder would reasonably object to the appointment.
In Re Global Fidelity Bank, the very limited prior involvement of the joint voluntary liquidators of the bank was held not to be a bar to their appointment by the Court (on which they took a neutral stance) as official liquidators under the court ordered supervision of the voluntary liquidation (which was ordered on their petition) as neither stage (2) or (3) was satisfied.