Can beneficial noteholders commence insolvency proceedings? Diverging views emerge across the offshore world

In an article published in Butterworths Journal of International Banking and Financial Law (JIBFL) in January 2024,  Stephen Moverley Smith KC and Rachel Carver discuss the recent flurry of cases in the BVI, Hong Kong and the Cayman Islands determining the standing of individual bondholders to bring liquidation proceedings against issuers. It examines the reasons for the divergent outcomes of the cases, and the factors which may contribute to the success or failure of future actions.

INTRODUCTION

In Cithara Global Multi-Strategy SPC v Haimen Zhongnan Investment Development (International) Co. Ltd (BVIHC(COM) 2022/0183), the BVI Commercial Court held that ultimate beneficial interest holders in notes were
contingent creditors. Within the previous three months, the converse conclusion had been reached in the Hong Kong case of Re Leading Holdings Group Limited [2023] HKCFI 1770 and in the Cayman Islands case of Re Shinsun Holdings (Group) Co., Ltd. FSD 192 of 2022 (DDJ) (unreported, 21 April 2023). This article considers the reasons for the divergent views expressed and whether the new path trodden in the BVI is likely to hold sway in the future.

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This article first appeared in Butterworths JIBFL in January 2024.

Barristers

Stephen Moverley Smith KC

Rachel Carver