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Freeman Fintech Corporation: Case Report – Part One: Recognition and assistance of officeholders appointed by a foreign court over Cayman incorporated companies

The Cayman Court recently recognised joint provisional liquidators appointed by the Hong Kong court over a Cayman company for the purposes of the company presenting parallel schemes of arrangement to its creditors. The schemes were subsequently approved and sanctioned by both courts.

Part One of this case report discusses some of the key issues considered by the Cayman Court on its scope and jurisdiction to recognise and assist foreign officeholders appointed over a Cayman company.

Part Two, found here, discusses the principles relevant to the Cayman court sanctioning a scheme of arrangement particularly in circumstances where, as was the case here, the scheme purported to compromise debt which was not governed by Cayman (or Hong Kong) law.



Freeman FinTech Corporation Limited (the “Company”) was incorporated as an exempted limited company in the Cayman Islands and has been registered in Hong Kong as a non-Hong Kong Company since 1992. Its shares have been listed on the Hong Kong Stock Exchange (“SEHK”) since 1998.

The Company is an investment holding company and part of a group of companies whose subsidiaries are principally engaged in the provision of financial services to customers in Hong Kong and the People’s Republic of China. The Company suffered significant cash flow problems in 2018 and 2019 that led to one creditor presenting a winding-up petition against it in Hong Kong on the grounds that the Company was insolvent.

Following the presentation of the petition, Ho Kwok Leung Glen and Lai Kar Yan (Derek) of Deloitte were appointed as joint provisional liquidators (the “JPLs”) by the Hong Kong court. On the same date, trading of the Company’s shares was suspended and the SEHK mandated certain requirements and conditions the Company was required to meet prior to the trading of its shares being permitted to resume.

The JPLs were of the opinion that an immediate winding up of the Company would not maximise creditor returns and that the interests of creditors would be best served by facilitating a restructuring of the Company’s indebtedness. The JPLs therefore obtained an order from the Hong Kong court extending their powers to enter into discussions on behalf of the Company for the purpose of a restructuring.


In order for the restructuring to be implemented, the JPLs needed to take certain steps in the Cayman Islands on behalf of the Company. However, in order to do so, they first needed to be recognised by the Cayman court. This is because the Hong Kong order appointing them was not of itself binding or enforceable in the Cayman Islands given the JPLs were not appointed in the Company’s country of incorporation. Therefore, in the absence of insolvency proceedings being commenced in the Cayman Islands, the JPLs would not be treated as being empowered to act on behalf of the Company (which power would remain with the Company’s directors and shareholders).

Had the Company been incorporated in Hong Kong, the JPLs would have been able to apply to the court under section 241 of the Companies Act, which provides a statutory avenue by which foreign appointees may be recognised by, and seek assistance from, the Cayman Islands court. However, that provision is of no assistance where the appointee was not appointed by the court in the company’s place of incorporation. It was, therefore, necessary for the JPLs to obtain recognition and assistance from the Cayman court under common law principles to enable them to present the scheme of arrangement on behalf of the Company to the Company’s creditors and obtain a (form of) stay of proceedings against the Company whilst the schemes were being implemented.

The Cayman Court has previously considered the scope of its common law jurisdiction to recognise and assist foreign officeholders of a Cayman incorporated company in circumstances where there are no parallel insolvency proceedings in Cayman in the matter of China Agrotech Holdings Limited [2017] 2 CILR 526 (affirmed in Changgang Dunxin Enterprise Company Limited (unreported, 1 March 2018)). The facts in China Agrotech were strikingly similar to this case.

Further, the well-reasoned decision of Mr Justice Segal in China Agrotech followed a review of the ever evolving common law position on the question of recognition and assistance in a number of recent key English authorities on the topic, including two from the House of Lords / Supreme Court; In Re HIH Casualty and General Insurance Ltd [2008] 1 WLR 852 and Rubin v Eurofinance [2013] 1 AC 236 and one from the Judicial Committee of the Privy Council; Singularis Holdings Ltd v PwC [2014 UKPC 36].


The general principles relevant to jurisdiction at common law, which can be taken from the majority speeches in Singularis (drawing on both HIH and Rubin), are as follows:

  1. Courts have for over a century exercised a power to assist foreign officeholders appointed by a foreign court in the place of a company’s incorporation. The power to do so is drawn from ordinary principles of private international law and does not require fresh or further winding up proceedings;
  2. Whether or not the court ought to provide assistance to a foreign officeholder depends on the nature of the power the court is being asked to exercise;
  3. Modified universalism is part of English common law; however, it is subject to local law and local public policy;
  4. The power of assistance exists for the purpose of surmounting the problems posed for a worldwide winding up of a company’s affairs and the territorial limits of each court’s powers; and
  5. Assistance cannot be given to permit the officeholder to do something which they are not permitted to do under the laws by which they were appointed, nor to do anything which is inconsistent with the substantive law and public policy of the assisting court.

Although the English cases (and therefore the analysis above) were all concerned with assisting officeholders appointed by a foreign court in the place of the company’s incorporation, the Cayman Court determined in China Agrotech that this assistance is available to foreign officeholders irrespective of the place of incorporation. Justice Segal dealt with this point head on in China Agrotech, having considered each of the English decisions, in detail, and the underlying rationale applicable to recognition and assistance – including modified universalism. He said:

“it seems to me that the power to recognise and assist arises and applies even in a case where the foreign liquidator has been appointed in a place other than the country of incorporation.”

The JPLs of the Company in this case sought the precise relief which was granted in China Agrotech and, as was the case in China Agrotech, Justice Segal was satisfied that the Cayman court had the jurisdiction to grant the relief sought to enable the JPLs to act on behalf of the Company to present the scheme and deal with the Company’s assets.


Having satisfied itself as to jurisdiction, it was then necessary for the Cayman court to satisfy itself of various matters relevant to the exercise of its discretion to recognise foreign officeholders at common law. Going through each of the matters identified in China Agrotech, the Cayman court was satisfied that such matters were present and applied equally to the application before it. In particular:

  1. The court was in substance dealing with a governance question: whether the JPLs should be permitted to present the petition on behalf of the company and consent to the scheme on its behalf;
  2. The steps the JPLs wished to take did not give rise to competing claims by creditors which would result in different levels of recovery or returns depending on whether the relief was granted;
  3. The Company’s board and its directors were unable or unwilling to act and had shown no sign that they would take steps to support or oppose the JPLs’ plans. In fact, the three executive directors had resigned, leaving only non-executive directors in office that had no power to commence winding up proceedings in the name of the Company and had taken no steps since the appointment of the JPLs;
  4. It would be impracticable and prejudicial to the interests of all stakeholders to delay matters by requiring shareholder approval for the JPLs’ application, which would have proved logistically challenging, time consuming and costly;
  5. There was no likelihood of an application being made for a winding up order in Cayman in circumstances where no creditor had taken any steps in Cayman since the appointment of the JPLs 18 months prior and the majority creditors were fully participating in the Hong Kong proceedings;
  6. The Company had substantial connections to Hong Kong, including all shareholders (save for one) having an address in Hong Kong, the Company’s principal place of business being in Hong Kong, its licenses having been issued by Hong Kong regulators and the majority of its customers being based in Hong Kong (or the PRC);
  7. There appeared to be no reason why stakeholders would benefit by a liquidation of the company in the Cayman Islands in circumstances where any appointee would be tasked with the same mandate as the JPLs and where parallel schemes of arrangement would still be necessary given Hong Kong was the jurisdiction in which the majority of the Company’s debt was governed.

The Cayman court concluded that separate winding up proceedings in the Cayman Islands would serve no purpose other than to incur costs and delay matters and, therefore, exercised its discretion to grant the relief sought.


It was accepted in this case that the Company could not obtain a statutory stay of proceedings in accordance with section 97 of the Companies Act, which operates only in circumstances where liquidation proceedings are commenced in Cayman pursuant to the Companies Act. Granting such a stay would amount to an impermissible exercise of the common law power identified by Lord Collins in Rubin and Singularis: applying legislation which does not apply “as if” it did.

The JPLs did not ask the court to recognise the JPLs “as if” they were appointed by the Cayman Court and did not apply for a statutory stay. However, they sought and obtained an order from the Cayman court, using its case management powers, that any proceedings issued by or against the Company in the Cayman Islands shall be assigned to the same Judge hearing the recognition application (Mr Justice Segal), such that appropriate directions could be made to stay or adjourn such proceedings if appropriate.


We are seeing an increasing number of instances of liquidators being appointed over Cayman companies by the Hong Kong court. In the course of the Hong Kong liquidation proceedings, those foreign liquidators will often need to take certain steps in the Cayman Islands, which requires them to apply for recognition of their foreign appointment (or fresh liquidation proceedings being commenced within the jurisdiction). Whilst in many instances it would be preferable for the Hong Kong insolvency proceedings to have been commenced in the Cayman Islands, particularly so that there can be no question that the directors’ powers have been displaced and the liquidators have the wide ranging powers granted to them under the Cayman Companies Act, creditors are often based elsewhere and wish to bring their claim in the jurisdiction in which they are based and which is often the location of the Company’s principal place of business.

Hong Kong will accept jurisdiction to make a winding up order against a Cayman incorporated company in certain situations, including but not limited to where the company has a sufficient connection to Hong Kong and there are creditors within the jurisdiction. The recent cases on recognition demonstrate the Cayman Court’s continued willingness to cooperate in such cross-border matters, particularly where the purpose is to facilitate a restructuring, and work collaboratively with the Hong Kong court to ensure the company’s affairs are restructured in the most convenient way possible and in the best interests of the company’s stakeholders.

Guy Manning - Partner, Campbells Grand Cayman - Litigation, Insolvency & Restructuring

Guy Manning

Partner, Head of Litigation, Insolvency & Restructuring
+1 345 914 5868

Shaun Folpp

Managing Partner, Hong Kong
+852 3708 3010

Jane Hale

+852 3708 3026