Shareholders of a Cayman Islands company may enforce their right to wind up the company on just and equitable grounds notwithstanding ongoing related foreign proceedings
The recent Cayman Islands Grand Court decision in Re Youbi Capital (Cayman) GP has clarified the position regarding an application to strike out a winding up petition as an abuse of process where related proceedings are taking place in another jurisdiction.
In Youbi, a shareholder petitioned the Grand Court to wind up the company on just and equitable grounds. Before the commencement of the Cayman proceedings, the petitioner had also brought proceedings in New York concerning her rights as a shareholder to dividends and alleging conversion and breach of fiduciary duty against directors. The company sought to have the petition struck out on the ground of abuse of process contending that the petition proceedings were abusive because they were duplicative of the New York proceedings, those proceedings show that the petitioner had an alternative remedy and there was a risk of inconsistent decisions.
The Grand Court considered the relevant legal principles upon which the Court will strike out a petition, i.e. where the petitioner is acting unreasonably or improperly in pursuing the petition and not pursuing an alternative remedy available to them. Where the actions of a company have resulted in a justifiable loss of confidence in the management of the company, the petitioner has a statutory right to seek and obtain a winding up order on just and equitable grounds and should not be deprived of such right merely because the company can point to some other remedies that may legitimately go some way to compensating the petitioner. The petitioner is entitled to take the view that it would prefer for the company to be wound up as opposed to having to pursue a series of piecemeal alternative remedies.
The Grand Court held that though there were overlaps in the two proceedings, the relief the petitioner sought in the Cayman Islands proceedings was not available and could not be obtained in the New York proceedings. The relief sought in the Cayman Islands proceedings was directed towards present and ongoing misconduct affecting both the petitioner and other shareholders whereas, in the New York proceedings, the petitioner sought compensation for what was alleged to have occurred. Accordingly, the Court held that the petition was not an abuse of process and dismissed the company’s strike-out application.
The decision of the Grand Court provides welcome clarity to Cayman Islands practitioners and shareholders that a related foreign proceeding is not necessarily a bar to enforcement of shareholders’ statutory rights in the Cayman Islands.