The default position under the Cayman Islands Companies Law is that the winding up of a company is deemed to commence at the time of the presentation of the winding-up petition. This is important, because the date of commencement of the winding up determines the date from which any subsequent dispositions of company property, transfers of shares or alterations in the status of company members will (unless the Court orders otherwise) be void. What, then, is meant by the “presentation” of the winding-up petition?
The Companies Law itself offers no definition. Some suggested answers, but unfortunately no definitive landing, are however to be found in one of the latest rulings concerning China Shanshui Cement Group Limited (the Company).
The petitioner, Tianrui, sought a declaration from the Court that the date of presentation was 30 August 2018. The Company, for its part, submitted that Tianrui’s declaratory summons was misconceived for two reasons: firstly, the issue of the date of the presentation was premature, dealt with a question which is currently hypothetical, and would never be an issue arising on the winding up petition itself (more about this argument here); and secondly, that in fact the petition was presented on 4 September 2018.
The issue of the date of the presentation was, it was alleged by Tianrui, important, because on 3 September 2018 the Company issued convertible bonds (allegedly improperly) in the amount of c$320m. If the date of presentation of the petition was 30 August 2018, the 3 September 2018 issuance might be avoided.
Tianrui submitted, by reference to CWR O.3, r.11(2), Practice Direction No 3/2013 and academic literature concerning the administrative process in England, that the date of presentation is the date on which the petition is provided to the Court. It further argued that great risk and uncertainty for the jurisdiction would result from the date of presentation being some later date because that may allow a company to freely dispose of assets until the sealing of the petition, thereby using administrative delay to circumvent the avoidance provisions. The Company submitted that the formalities required by the CWR were only “pre-petition” formalities, and that presentation only took place once the petitioner had issued a cheque to the Court and the Court had thereafter sealed the petition. This, it was argued, was consistent with CWR O.3, r.11(3), to the effect that a petition must be served “immediately after having being presented/issued.”
For other reasons (see here), the Court ultimately declined to grant Tianrui the relief sought. However, notwithstanding that the Court did not rule on the issue of the date of presentation, the judgment is useful insofar as it addresses the arguments for and against what are likely to be the only two alternative options: (i) the date on which the petition is provided to the Court; or (ii) the date (often, due to the Court’s administrative processes, a later date) on which the Court seals the petition.