In the matter of Caledonian Bank Limited 2016/COM/com/00031
Wednesday, 24th August 2016
The Supreme Court of the Commonwealth of the Bahamas made an ancillary winding up order against Caledonian Bank Limited, a company registered in the Cayman Islands, under the Companies Winding-Up Amendment Act 2011.
Caledonian Bank Limited ("Caledonian") was incorporated in the Cayman Islands where it maintains its Centre of Main Interests. On 06 February 2015, legal proceedings were commenced against Caledonian in New York by the United Stated Securities and Exchange Commission. Following this news, Caledonian's customers began to withdraw funds from their accounts, causing the bank to become cash flow insolvent.
On 10 February 2015, the Cayman Islands Monetary Authority took control of Caledonian and one week later, presented a Winding Up Petition against the bank. On 23 February 2015, a Winding Up Order was made against Caledonian by the Grand Court of the Cayman Islands and Joint Liquidators were appointed.
In early 2016, the Liquidators applied to the Bahamian courts for recognition at common law and under the Companies (Winding-Up Amendment) Act 2011 ("the Act"). This Application was made on the basis that a number of Caledonian's assets were located in the Bahamas, including a number of outstanding loans. However, the Application was dismissed by the Bahamian court.
Following this, the Liquidators made a second Application that Caledonian be wound up as a foreign company under s185 of the Act, claiming that this was the only alternative to gain access to Caledonian's assets in the Bahamas. The Liquidators argued that the concept of ancillary liquidation should be utilised as recognition was not available. The purpose of such proceedings enabled the Liquidators to locate and realise assets for the benefit of the creditors.
The court considered that s185 of the Act created jurisdiction to wind up a 'foreign company which has property in the Bahamas' and concluded that as the company was insolvent, the Bahamian court had jurisdiction to wind up Caledonian. Consideration was also given to s190 of the Act which states that the company may itself petition for its winding up.
In making this decision, court stated that "the common law has long since recognised the existence of parallel winding up proceedings in multiple jurisdictions where a company holds assets or does business". In considering the various authorities available, the court held that a foreign company may be wound up even though it had already entered liquidation in another jurisdiction. It was noted how ancillary winding up proceedings should feed into a main liquidation and that "for an ancillary winding up to be effective, it calls for a level of judicial comity and co-operation between the courts of the respective countries in which winding up proceedings are pending".
Finally, the court stated that the court should consider the wishes of creditors as a whole in relation to the struggling company and that none should receive an advantage, or suffer a disadvantage, as a result of where that creditor is located compared to the situation of any assets.
As such, the court ordered that Caledonian be wound up in accordance with s185 of the Act.