Offshore Litigation

Blog

Offshore Litigation

Contributors

Jonathan Addo
Jonathan Addo
  • Jonathan Addo

  • Partner
  • British Virgin Islands
Jeremy Child
Jeremy Child
  • Jeremy Child

  • Partner
  • London
Stuart Cullen
Stuart Cullen
  • Stuart Cullen

  • Partner
  • British Virgin Islands
Julie Engwirda
Julie Engwirda
  • Julie Engwirda

  • Partner
  • Hong Kong
Peter Ferrer
Peter Ferrer
  • Peter Ferrer

  • Partner
  • British Virgin Islands
Claire Goldstein
Claire Goldstein
  • Claire Goldstein

  • Partner
  • British Virgin Islands
Hazel-Ann Hannaway
Hazel-Ann Hannaway
  • Hazel-Ann Hannaway

  • Partner
  • British Virgin Islands
Nick Hoffman
Nick Hoffman
  • Nick Hoffman

  • Partner
  • Cayman Islands
Andrew Johnstone
Andrew Johnstone
  • Andrew Johnstone

  • Partner
  • Hong Kong
Paula Kay
Paula Kay
  • Paula Kay

  • Partner
  • Hong Kong
Phillip Kite
Phillip Kite
  • Phillip Kite

  • Partner
  • London
Vicky Lord
Vicky Lord
  • Vicky Lord

  • Partner
  • Shanghai
Paul Madden
Paul Madden
  • Paul Madden

  • Partner
  • Cayman Islands
Henry Mander
Henry Mander
  • Henry Mander

  • Partner
  • Cayman Islands
Ian Mann
Ian Mann
  • Ian Mann

  • Partner
  • Hong Kong
William Peake
William Peake
  • William Peake

  • Partner
  • London
Lorinda Peasland
Lorinda Peasland
  • Lorinda Peasland

  • Consultant
  • Hong Kong
Chai Ridgers
Chai Ridgers
  • Chai Ridgers

  • Partner
  • Hong Kong
Nicola Roberts
Nicola Roberts
  • Nicola Roberts

  • Partner
  • Hong Kong
  • Singapore
Paul Smith
Paul Smith
  • Paul Smith

  • Partner
  • Cayman Islands
Andrew Thorp
Andrew Thorp
  • Andrew Thorp

  • Partner
  • British Virgin Islands
Jessica Williams
Jessica Williams
  • Jessica Williams

  • Partner
  • Cayman Islands
Jayson Wood
Jayson Wood
  • Jayson Wood

  • Partner
  • Cayman Islands

Internal affairs: the New York Supreme Court applies Cayman Islands law on derivative actions

In a recent judgment in Matter of Renren, Inc. Derivative Litigation v 67X, the Supreme Court of New York rejected an application by the defendants to dismiss claims brought in New York by the minority shareholders of a Cayman Islands company on the basis that those minority shareholders lacked standing to bring the claims on the company’s behalf.

In Renren, the minority shareholder plaintiffs alleged that certain of the company’s directors and officers, along with its majority shareholders, perpetrated a scheme to defraud the company, and brought a claim in New York on the company’s behalf against those wrongdoers and various others. The defendants sought dismissal of the action on the basis that the minority shareholders lacked standing to bring a claim derivatively on the company’s behalf.

Applying the “internal affairs” doctrine, the Supreme Court of New York looked to the laws of the Cayman Islands (being the laws of the place of the company’s incorporation that govern the company’s “internal affairs”) to determine whether the minority shareholders were entitled to bring the claim derivatively on the company’s behalf.

Under Cayman Islands law, the general position is that the appropriate plaintiff in respect of wrongs committed against a company is the company itself. This general rule is subject to four narrow exceptions, including that the wrong complained of comprises a fraud on the minority shareholders. The relevant inquiry is whether the alleged wrongdoers have the power to stop the company from bringing a claim against them.

In Renren, the Supreme Court was satisfied that the combined voting power of certain of the defendants had the effect of impeding the company from pursuing claims in respect of the fraud complained of, and consequently refused to dismiss the action on that basis.  

This blog post was written by Natasja Levy, a member of our Cayman Islands articled clerk programme.

Internal affairs: the New York Supreme Court applies Cayman Islands law on derivative actions