In an important decision in Tiranrui (International) Holding Company Limited (“Tiranrui”) v. China Shanshui Cement Group Limited (“the Company”), the Court of Appeal of the Cayman Islands clarified the purpose of s.99 of the Companies Law (as revised) ‒ the equivalent of s.127 of the English Insolvency Act 1986 ‒ and the test and scrutiny to be applied in hearings of an application for a Validation Order.


Tiranrui successfully appealed a Validation Order made by Mangatal J which pursuant to s.99 of the Companies Law validated a proposed transfer of shares in the Company held by 18 of the Company’s shareholders on the register (representing 43.96% of the Company’s issued share capital) to the Hong Kong Securities Clearing Company Nominees Limited (HKSCC) to allow the beneficial interests in the shares to be traded on the HKSE.

The effect of a s.99 Validation Order is that any disposition of a company’s property between when a winding up petition is presented and when the petition is determined by the Court shall not be void (which they otherwise would be) if the company is wound up; those transactions cannot usually be unwound by the liquidator. Section 99 of the Companies Law provides that:

“When a winding up order has been made, any disposition of the company’s property and any transfer of shares or alternation in the status of the company’s members made after the commencement of the winding up is, unless the Court otherwise orders, void.”

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