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In a very colourful case, the Privy Council recently examined the duty of care owed by directors of a company, in circumstances where its ultimate owner had been betrayed by his agent and caused the Company to be stripped of its entire asset holding.

The UK Supreme Court has pruned back the weed like growth of the “reflective loss” principle in its long awaited judgment in Sevilleja v Marex Financial Ltd [2020] UKSC 31 delivered on 15 July 2020. The Supreme Court has clarified that the principle is much narrower than it appears from its incorrect application in earlier decisions, bringing certainty to the avenues available to aggrieved shareholders and creditors, including those in the Cayman Islands and British Virgin Islands.

In a recent judgment in Matter of Renren, Inc. Derivative Litigation v 67X, the Supreme Court of New York rejected an application by the defendants to dismiss claims brought in New York by the minority shareholders of a Cayman Islands company on the basis that those minority shareholders lacked standing to bring the claims on the company’s behalf.

As a matter of Cayman Islands law, liquidators wishing to sell company property by way of public auction or private contract may only do so with the sanction of the Grand Court. Many such sanction applications are uncontested and may be suitable to be heard on the papers. Sanction applications are not, however, mere rubber stamping exercises. That is especially true where they are opposed.

In the recent case of Tianrui (International) Holding Company Limited v China Shansui Cement Group Limited, the Grand Court gave judgment on the defendant’s applications to strike out a contributory’s winding up petition for abuse of process and an application to strike out a subsequent writ action by the petitioner.

In this episode, Julie Engwirda and Ian Mann discuss directors’ duties and obligations where a company is experiencing financial pressure.