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Bestway Global Holdings Inc: A summary of the principles applied when considering sanction applications for schemes of arrangement and capital reductions

October 2021 Sarah McLennan

In Bestway Global Holdings Inc. (FSD 208 of 2021 – unreported), Doyle J gave a comprehensive and helpful review of the principles to be applied by the Court when considering whether to sanction a scheme of arrangement and confirm a capital reduction. Although schemes of arrangement are commonplace in the Cayman Islands, rarely are the principles and authorities considered at sanction hearings so thoroughly set out in published judgments. The decision therefore provides useful guidance to practitioners.

The objective of a scheme of arrangement is to allow the company to enter into an agreement with its shareholders and/or creditors (or any class of them) to either:

  1. restructure its affairs while solvent (including the frequent use of schemes to privatise public companies); or
  2. reach a compromise or arrangement with creditors or shareholders (or any class of them) after liquidation has commenced.

A scheme of arrangement in the Cayman Islands requires the sanction of the Grand Court in order for it to be binding on the company and its shareholders and/or creditors (“Scheme Participants”).  In every case, the court will consider whether it is appropriate to convene class meetings of the Scheme Participants and, if so, what the composition of those classes should be.  The applicant must satisfy the court that the scheme documentation will provide the Scheme Participants with all information reasonably necessary to make an informed decision about the merits of the proposed scheme of arrangement and will have the right to attend and be heard at the hearing of the petition.

 

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Bestway Global Holdings Inc: A summary of the principles applied when considering sanction applications for schemes of arrangement and capital reductions

 


Sarah McLennan
Associate

Cayman Islands   +1 345 814 7364


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