One may think the answer to the question is "objectively obvious," but Justice Kawaley was asked to clarify the circumstances under which parties are permitted to exercise their rights to access the court file of a company in liquidation in the Cayman Islands. In a ruling delivered on 11 October 2023, in In The Matter of Global Cord Blood Corporation (In Provisional Liquidation), Cause no. FSD 108 of 2022, Kawaley J found that there is no meaningful distinction between "liquidation" and "liquidation proceeding" for the purposes of granting court file access to the appropriate interested parties.
Background and Petitioner's objection
The company, Global Cord Blood Corporation ("GCBC"), had been placed into provisional liquidation in September 2022 by Blue Ocean Structure Investment Limited (the "Petitioner"), which had sought to remove GCBC's management team. GCBC's former directors requested access to the court file in October 2023, on the basis of rights under the court rules they asserted they had, but the Petitioner objected to this exercise of the right to inspect because it maintained that GCBC was not yet in official liquidation.
The Petitioner argued that the right to inspect only arose after the "commencement of the liquidation" by winding-up order, which was distinct from a liquidation proceeding like the present pre-winding up order phase. In these circumstances, the Cayman court Registrar, to whom the application for access had been made, referred the issue to the judge for determination on the papers (i.e., in writing).
Procedural rights to inspect exist at all stages
Under the Cayman Companies Winding Up Rules (2023 Revision), O.26, r.4, there are several parties who have the right to inspect and take copies of the court file of a company in liquidation, including "any person who was a director or professional service provider of the company immediately before the commencement of the liquidation." The Companies Act (2023 Revision) of the Cayman Islands indicates that the winding-up of a company is deemed to commence at the time the petitioner presents a petition for winding up to the court (i.e., court-ordered liquidation), but only if and when such an order has been made. The Petitioner relied on these subtle differences in language to support its position, but the court was not convinced.
Kawaley J held that the former directors were entitled to inspect the court file for several reasons. First, for the exercise of rights under the rules, there is no distinction to be made between a liquidation and a liquidation proceeding, as the governing opening words of the rule use the latter term. The natural and ordinary meaning of “liquidation proceeding” suggests a proceeding at any stage relating to a company's liquidation. This was supported with reference to other rules, which do not permit the opening of more than one court file for a liquidation proceeding, and the costs regime that applies to all phases of a liquidation proceeding, including the pre-winding-up and petition phase.
Moreover, the collective character of winding-up proceedings suggests that the purpose of conferring positive inspection rights on parties interested in the proceedings is to facilitate their exercise of fair hearing rights. Kawaley J held that "It would be inconsistent with such fundamental rights to limit inspection rights to the winding-up phase of a liquidation proceeding alone, and to exclude their operation when the Court is at the stage of deciding how the petition should be adjudicated." Liquidation matters can sometimes take months or even years to reach winding-up, as is the case with GCBC, which makes this decision a sensible confirmation of interim procedural rights.
Directors and officers may still be subject to regulatory, fiduciary and other duties after a company commences liquidation proceedings, so it is reasonable to assume they may need to access, inspect and take copies of items in the liquidation court file.
The decision closes with the caveat that inspection rights are not absolute and do not apply to sealed documents. The court can still exercise its inherent jurisdiction over procedural matters to ensure fairness where appropriate. Cayman Islands liquidation proceedings are subject to a particular set of rules that ensure matters are conducted in a just and equitable manner, including with reference to the overriding principles of open justice. The team at Bedell Cristin is well equipped to help with any "fight for your right" to conduct insolvency proceedings in the most efficient and expedient way possible.