Apr 2026
In a recently published decision, Jin Yao Holdings Ltd v Forever Winner International Ltd and another (BVIHC (COM) 2023/0064), the Honourable Justice Mithani delivered a short but important judgment on the proper form of liquidation orders in the British Virgin Islands. The dispute was a narrow one – whether certain of the joint liquidators’ powers should be subject to sanction – but the reasoning has broader implications for insolvency practice in the jurisdiction.
From Practice to Principle
Historically, the approach in the BVI, often associated with the practice of Bannister J, was to draw a distinction between categories of powers.
In broad terms, a small subset of powers was treated as requiring sanction. These were typically the more “invasive” or dispositive powers, namely the power to pay a class of creditors in full, to compromise claims with creditors or other claimants, to compromise liabilities and disputes affecting the company, and to commence, continue or defend proceedings. The balance of the powers could be exercised without sanction.
That distinction became embedded in practice. Standard form orders were routinely drafted on that footing, and the inclusion of sanction requirements became, in effect, automatic.
One can see how that distinction developed. These powers go directly to the substance of the estate, affecting distributions, extinguishing claims, or engaging the company in litigation risk. Requiring sanction was therefore viewed as a sensible safeguard: a way of ensuring that particularly significant or irreversible decisions were subject to prior judicial oversight. What began as a sensible safeguard against overreach however gradually became a matter of routine.
The difficulty, as the Court recognised, is that this practice was not entirely consistent with the statutory framework.
A Return to the Insolvency Act
Section 186 of the Insolvency Act 2003 (the “Act”) is the starting point. It confers on a liquidator all powers necessary to carry out his or her functions, including those set out in Schedule 2. Section 186(3) gives the Court a discretion to require that certain powers be exercised only with sanction, but that provision is framed as an exception, not the rule.
It follows that the Act does not proceed on the basis that some powers inherently require sanction. Rather, all powers are available to the liquidator, and the Court may impose restrictions where appropriate.
As Mithani J emphasised, on a proper construction of section 186, the default position is that all powers are exercisable without sanction. The Court’s ability to require sanction is an exception to that position, not its foundation. Any departure from the default must therefore be justified by reference to the circumstances of the particular case.
Sanction as Exception, Not the Rule
The Jin Yao judgment squarely addresses the rationale for sanction. It is, as the Court observed, a safeguard, one that may be appropriate where there is a demonstrated risk of prejudice, conflict, or misuse of power.
But that rationale does not justify its routine inclusion.
In rejecting the proposed restrictions in Jin Yao, the Court noted that no material had been put forward to justify the imposition of sanction, whether in relation to the company’s principal asset or more generally. That absence of justification was decisive. The liquidation order was made without restriction.
The significance lies not merely in the outcome, but in the shift in emphasis. Sanction is no longer to be treated as a default control mechanism, but rather as a targeted intervention, deployed only where the facts require it. That approach brings the BVI back into alignment with the statutory scheme.
Form of Order and Cross-Border Utility
The Court also addressed the drafting of liquidation orders. There is clear utility in articulating, on the face of the order, the scope of the liquidator’s powers.
That may be achieved by stating that all powers under section 186 and Schedule 2 are exercisable without sanction, or by setting them out expressly with the same confirmation unless specific restrictions are identified. This is not simply a matter of drafting style. In a jurisdiction such as the BVI, where liquidations are frequently cross-border, foreign courts will often look to the originating order to determine the extent of the office-holder’s authority. Clarity in the order avoids unnecessary friction at the recognition stage.
Practical Consequences
The immediate effect of the decision is to restore flexibility to liquidators. The removal of routine sanction requirements reduces the need for interlocutory applications and allows office holders to act with the speed that commercial situations often demand.
There is also an obvious cost benefit. Requiring sanction as a matter of course introduces additional expense to the estate, often without any identified risk to justify it.
More broadly, the decision reflects a continued move away from judicial micro-management of insolvency proceedings. Liquidators are fiduciaries and officers of the Court, but they are also expected to exercise commercial judgment. The statutory framework entrusts them with that role.
Supervision Remains Intact
This is not, however, an abdication of oversight by the Court.
The Court was careful to emphasise that interested parties remain protected. The Act provides mechanisms to challenge or supervise the conduct of liquidators, and liquidators themselves may seek the Court’s directions where appropriate.
Nor does the decision preclude the imposition of sanction in an appropriate case. Where there is evidence of potential prejudice, conflict, or misuse of power, restrictions may still be justified. The point is simply that they must be justified.
A Change in Starting Point
This judgment acknowledges the existence of prior practice but makes clear that practice must yield to principle where the two diverge, while noting that the issue may be the subject of further consultation, including with the BVI Commercial Court Users’ Committee.
The practical shift is a subtle but important one. The question is no longer which powers should routinely be subject to sanction. Instead, the question is whether there is any sufficient reason to impose sanction at all. Practitioners will therefore need to think more carefully about whether sanction is required at all and importantly be able to justify it.
Jin Yao Holdings Ltd is a short decision, but one with meaningful implications for insolvency practice in the BVI. It reanchors the form of liquidation orders in the statutory framework, restores flexibility to office holders, and confirms that judicial safeguards should be applied with precision rather than by default.
That is a welcome, and, arguably, overdue, development.