No armchair liquidators – court confirms appointment of provisional liquidators to Swiss company
Contributed by Harney Westwood & Riegels From ILO
Private Client & Offshore Services British Virgin Islands
In the latest judgment regarding the DPH liquidation,(1) the BVI Court of Appeal upheld the appointment of BVI provisional liquidators in respect of a Swiss company and clarified that evidence of dissipation of assets (in the Mareva sense) may not be a pre-condition to the appointment of provisional liquidators.
Facts
KMG filed an application seeking the appointment of liquidators to DPH (a Swiss company) based on an unpaid arbitral award of $200 million. KMG applied in the British Virgin Islands on the grounds that:
DPH had assets in the jurisdiction (two wholly-owned BVI registered companies); and
it would take at least two years to commence Swiss bankruptcy proceedings.
At first instance, DPH successfully argued that a Swiss liquidator could take control of the subsidiaries remotely, without the assistance of the BVI courts outlining how this would work hypothetically (the assistance point). On that basis, the court held that KMG had failed to show that the British Virgin Islands was the appropriate forum and leave to serve out was set aside.
Decision
The Court of Appeal rejected this decision, finding that:
the suggestion that a Swiss liquidator could dispose of the subsidiaries from an “armchair in Switzerland” was flawed; and
the assistance point addressed the mechanics of a liquidation but was not relevant to the determination of forum.
The court further held that the key considerations were:
the likely two-year delay in commencing Swiss bankruptcy proceedings;
the fact that the subsidiaries were the principal assets of DPH and no assets had been identified in Switzerland; and
KMG’s position as the most substantial creditor and its aim to pursue a BVI liquidation.
Regarding the validity of the provisional liquidators’ appointment, the court found that evidence from public searches had established the speed at which DPH could transfer assets between jurisdictions (in one instance, shares in a European subsidiary had been transferred twice in a 35-minute window). The court examined the meaning of the ‘risk of dissipation’, finding that dissipation in the Mareva sense or evidence of asset-stripping was not necessary (Re a Company, ex parte Nyckeln Finance Co Ltd applied); the test was whether there was a serious risk that the DPH assets may cease to be available – which was satisfied.
For further information on this topic please contact Fleur O’Driscoll at Harneys’ Hong Kong office by telephone (+852 5806 7800) or email ([email protected]). Alternatively, contact Peter Ferrer at Harneys’ Tortola office by telephone (+1 284 494 2233) or email ([email protected]). The Harneys website can be accessed at www.harneys.com.
Endnotes
(1) For further details please see “Tick, tock – the need to keep an eye on the clock in liquidator applications”.
