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Insolvency and Restructuring
Stuarts Walker Hersant Humphries (“Stuarts”) Insolvency and Restructuring team provides independent legal advice and representation across the spectrum of insolvency related matters in the Cayman Islands. We are proud of our record of delivering customised and cost effective advice in a commercially sensitive and responsive manner.
Who We Act For
We represent investment funds, mutual funds and hedge funds, in their capacity as contributories or creditors, who want to petition for the winding up of Cayman Islands companies. We also represent directors and Cayman Islands companies who want to defend winding-up petitions and liquidators/ provisional liquidators who have been appointed by the Court.
We have specific experience in prosecuting and defending petitions and in advising in respect of ‘just and equitable’ petitions, disputed debt petitions, quasi partnership disputes, breach of director duties and fraud. We regularly undertake complex and lengthy disputes in the Financial Services Division of the Grand Court which, almost always, have cross-border elements and require the organisation and presentation of evidence from a number of jurisdictions. We have experience handling disputes which involve concurrent actions in foreign jurisdictions including Chapter 11 proceedings in the US, winding-up proceedings in other off-shore jurisdictions and the appointment of provisional liquidators.
We have advised and acted for creditors, contributories and fund managers who wish to restructure Cayman Islands based funds, in particular, acting on schemes of arrangement.
We act for liquidators throughout the course of the liquidation process and in respect of claims available to the liquidation estate. In addition, we have been engaged in proceedings relating to the recognition of foreign liquidators in the Cayman Islands, proof of debt disputes and issues relating to segregated portfolio companies.
We focus on providing commercial advice before proceedings are commenced or defended to enable the client to assess whether it is in their commercial interest to engage the Court’s winding-up jurisdiction. We believe in providing advice that goes directly to the issue of how much a creditor/contributory is likely to recover, whether there are funds available and, in relation to defending petitions, whether it is in the commercial interests of the company to resist the petition.
Recent High-Profile Insolvency Matters:
The Cayman Soundview Litigation: Acting for the Soundview companies in contested winding-up proceedings before the Cayman Islands Grand Court. The proceedings concerned, inter alia, the effect of the filing, prior to the Cayman Hearing, of bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code. Despite the automatic stay on proceedings consequent upon the filing of Chapter 11 bankruptcy proceedings in New York, the Grand Court appointed Joint Official Liquidators over the Cayman companies. This led to further proceedings in New York where the US Bankruptcy Court held that the automatic stay under the Bankruptcy Code was effective immediately upon the filing by the Cayman companies of the Petitions under Chapter 11 of the Bankruptcy Code. Stuarts acted in both the Grand Court and also provided assistance to the companies before the US Bankruptcy Court and in the taking of Depositions on behalf of the Soundview companies for use in the US Bankruptcy Proceedings.
Trikona Advisors Limited: Acting for a 50% shareholder in defence of a winding-up petition presented by the remaining 50% shareholder on the basis that it was ‘just and equitable’ to wind-up the company. The Cayman Islands company, which was the subject of the winding-up proceedings, was deemed to be a ‘quasi-partnership’ as between the shareholders. The 7 day trial before the Financial Services Division of the Grand Court involved issues in relation to offers to purchase a shareholder’s shares as an alternative to winding-up, valuation mechanisms for shareholdings, the legitimate expectations of the parties in a ‘quasi-partnership’ dispute and allegations of misconduct as a director. Proceedings were concurrent in Connecticut, Mauritius and India.
Culross Global SPC –v- Strategic Turnaround Master Partnership Limited: Acting for the company in contested winding-up proceedings before the Cayman Islands Grand Court, Court of Appeal and before the Privy Council. Stuarts acted on the leading Cayman Islands case in respect of share redemptions and in respect of the construction of Fund documentation. The proceedings concerned whether the company had validly suspended the payment of redemption proceeds. The proceedings also concerned how the company’s Articles of Association were to be construed in light of the provisions of the company’s Confidential Explanatory Memorandum.
Reserve International Liquidity Fund: Acting for the Directors of Reserve International Liquidating Fund in connection with proceedings under Section 241 of the Companies Law. Opposing a Petition for the recognition of Liquidators appointed in the BVI, including issues relating to Forum Non Conveniens and Lis Alibi Pendens. The Cayman Proceedings were brought in the context of multiple State Court lawsuits and pending interpleader applications before the US District Court. The proceedings were brought in the context of the restructuring of a US$2.5 billion money market fund, following the collapse of Lehman Brothers.
Sphinx Group: Representing and advising hfc Limited as co-promoter with Deutsche Bank AG of 11 parallel schemes of arrangement of the Sphinx Group of 22 Cayman hedge funds (in official liquidation) [“The Sphinx Scheme”]. The Sphinx Scheme compromises disputed liquidation issues amongst investors with claims totaling US$735 million and seeks to effect agreed distributions in the liquidations. Stuarts has worked in conjunction with Linklaters and counsel for the Joint Official Liquidators in the preparation of all Scheme Documentation, and in advising on all aspects of this highly complex Scheme.
Fairfield Greenwich Group: Providing multi-disciplinary advice to the US fund manager on restructuring its 27 investment funds incorporated in the Cayman Islands. This advice included:
- Advising a number of the Fairfield Funds on claw-back claims made against them by the trustee of the estate of Bernard L Madoff Investment Securities LLC [“The Madoff Trustee”], including advising on the negotiations and settlement between the funds and the Madoff Trustee;
- Advising on the Fairfield Funds’ claims against the Madoff Estate and submissions of such claims to the Madoff Trustee;
- Advising on the sale of illiquid positions in a number of Fairfield Funds on the secondary market via schemes of arrangement and the use of special purpose vehicles to hold illiquid positions and other assets;
- Advising on the suspension of redemptions and subscriptions into a number of the Fairfield Funds;
- Advising on the orderly winding up of various Fairfield Funds;
- Advising on the sale of distressed positions to another fund-of-funds group.
Hurlstone Holdings Ltd: Successfully obtaining the appointment of Provisional Liquidators in respect of a local Cayman Islands enterprise.