The Court of Appeal confirms that BVI liquidators can turn back time
A recent decision of the Court of Appeal of the Eastern Caribbean Supreme Court affirmed that liquidators of BVI companies can obtain retrospective sanction from the BVI Court.
In K&P Managerial Limited (K&P) v Mr Paul Pretlove, Liquidator Of Hadar Trade And Invest Limited (In Liquidation) (BVIHCMAP 2019/10), the sole member of the company sought to overturn the first instance decision of Justice Green which granted the Liquidator retrospective sanction to enter into a transaction to sell the assets of the company.
The Liquidator was seeking the Court’s sanction to sell shares which the company held in a Cypriot registered company (M), which in turn held property in Moscow. Under the order appointing the Liquidator sanction was not required and was sought voluntarily. There were no liquid assets in the liquidation estate, and despite requests made to both K&P and the creditor of the company, there was no funding available to market the shares. The Liquidator received offers to purchase the shares from a third party. However, under the terms of M’s M&A there were pre-emption rights in favour of the majority shareholder of M, and the shareholder opted to exercise its right to purchase the shares.
There was urgency to the sale of the shares. The property in Moscow was heavily financed, the shares were charged and the Liquidator was told that the loans over the property were in danger of not being serviced. The Liquidator therefore entered into the pre-emption process prior to seeking the sanction of the Court. The sanction application was therefore made on a retrospective basis.
K&P opposed the sale on the basis that it considered the sale price to be at an undervalue. K&P appeared at the sanction application and also argued that the BVI Court did not have jurisdiction under the Insolvency Act (the Act) to grant sanction retrospectively.
At first instance, Justice Green drew an analogy between sanction and an application under s.273 of the Act, which permits interested parties to apply to the Court to confirm, reverse or modify any acts or decisions of a Liquidator. He held that the tests applied under s.273 and s.186(5) of the Act (which grants the Liquidator power to apply for sanction) are essentially the same, and so, if it is possible to look back retrospectively under s.273, then the same should be the case under s.186(5) of the Act. Justice Green considered that a Liquidator could apply for sanction at any time.
K&P appealed Justice Green’s decision but the Court of Appeal dismissed the appeal. The Court of Appeal held that it was in no doubt that s.186(5) of the Act permitted the Court to grant retrospective sanction. In this case, they found that the evidence provided by the Liquidator was considered by the Judge and he properly took into account all of the relevant factors. Justice Green was therefore found to have exercised his discretion properly.
Harneys acted for the Liquidator.