Recognition of foreign receivers by the Grand Court of the Cayman Islands
Recognition of foreign receivers by the Grand Court of the Cayman Islands (Cayman Court) is an important issue to insolvency practitioners, especially receivers.
On February 8, 2018, the Cayman Court, in FSD Cause No. 234 of 2017 (ASCJ) the matter of Silk Road Funds Ltd., issued a judgement which was published on May 30 2019. In this judgement, the Cayman Court provided some important clarification about the path to recognition.
An important initial point is that the Cayman Court will not recognise a foreign appointed receiver if doing so would directly or indirectly enforce a penal law or judgement of a foreign state. This is very critical to receivers who may be pursuing regulatory agency penal fines as they will not be granted recognition.
The Cayman Court also considered three primary methods by which a foreign receiver may be recognized in the Cayman Court: the statutory route, the modified universalism route and the common law route. For the statutory route to be applicable, the receiver must be a foreign representative of a distinct legal entity. In this case, the receivers were not “foreign representatives.” Regarding the modified universalism route, the Cayman Court ruled that in Silk Road Funds Ltd., the absence of the four distinct legal consequences (noted in the Privy Council ruling Singularis Holdings Limited v. PriceWaterhouseCoopers  UKPC 36) in these receivership proceedings prevented the application of modified universalism.
The Cayman Court did find that the receiver could gain recognition through the common law method. For this approach to be viable, “Sufficient Connection” must be established. There are four tests applied to determine if Sufficient Connection exists.
1. Has the company in respect of whose assets of the receiver has been appointed and made a defendant in the action in the foreign court?
2. Has the company in respect of whose assets the receiver has been appointed been incorporated in the country which appointed receiver?
3. Would the courts of the country of incorporation recognise a foreign appointed receiver?
4. Has the company carried on business in the jurisdiction of the appointment or is the seat of its central management and control located there?
In this matter, the Cayman Court ruled Sufficient Connection existed and granted recognition.
This short synopsis is a very high-level summary of this judgement. Contact Chip Hoebeke at firstname.lastname@example.org for more information.