Jun 2026
Introduction
What can the Cayman Islands Grand Court do to protect company assets when the parties have agreed to resolve their underlying dispute through arbitration?
Two recent judgments of the Grand Court of the Cayman Islands — Peakwave Investment Management Ltd v Energy Evolution GP Ltd [2026] CIGC (FSD) 7 and [2026] CIGC (FSD) 22 – offer important guidance for investors, fund management and other stakeholders in Cayman Islands vehicles seeking an interim remedy for asset preservation.
The Dispute: a Joint Venture
The dispute arose from a joint venture agreed between Peakwave Investment Management Limited (“Peakwave”) and Mr Jiao Shuge (“Mr Jiao”), structured through a Cayman Islands exempted limited partnership (the “Fund”) with a Cayman-registered exempted company acting as its general partner (the “GP”). Through intermediate entities incorporated in Hong Kong and the British Virgin Islands, the Fund held interests in profitable, dividend issuing electric battery businesses in Mainland China.
The shareholders’ agreement between the parties included a broad arbitration clause, providing for any disputes to be administered by the Hong Kong International Arbitration Centre (“HKIAC”).
Peakwave alleged that Mr Jiao had orchestrated the diversion of substantial dividends every quarter — tens of millions of US dollars each time — away from the Fund and into entities associated with Mr Jiao, in breach of the Fund’s limited partnership agreement and the GP’s shareholders agreement. Mr Jiao admitted to this diversion but argued that the dividends related to profits which predated the joint venture, and that Peakwave’s management had agreed that he could retain the dividend payments.
Judgment No. 1: The Court’s Power to Appoint Provisional Liquidators
In June 2025, Peakwave filed a winding up petition against the GP on the “just and equitable” basis and applied to appoint provisional liquidators. Mr Jiao responded with a cross-application to stay the proceedings in favour of arbitration.
The core legal question was whether the Grand Court retains the power to appoint provisional liquidators notwithstanding the underlying winding up petition being stayed in deference to an ongoing arbitration.
It was held that the winding up petition and the arbitration are complementary — they are component parts of the overall resolution of the parties’ dispute. The Court should respect the arbitration agreement by staying the petition so that the tribunal can determine the arbitrable factual and legal issues, but the Court retains jurisdiction over those aspects of the dispute that only it can resolve, such as the appointment of provisional liquidators.
Critically, the Court emphasised that a stayed winding up petition does not cease to exist; it is merely held in abeyance. Because the arbitral tribunal has no power to appoint provisional liquidators, the Court’s exercise of that statutory power does not trespass on the tribunal’s jurisdiction.
Having concluded that the statutory test under section 104(2) of the Companies Act was satisfied — including a prima facie case for winding up, evidence of asset dissipation, and mismanagement by the directors — the Court appointed joint provisional liquidators. However, Justice Asif was clear that the provisional liquidators’ powers should be “strictly limited to what is absolutely necessary” and must avoid encroachment on the competence of the arbitral tribunal. In particular, the Court declined to give the provisional liquidators any investigatory function, holding that it was for the parties to pursue discovery through the arbitration.
Judgment No. 2: The Scope of Provisional Liquidators’ Powers and the Role of Directors
The second judgment arose from a dispute about the meaning and effect of the Appointment Order that was finalized on 1 September 2025, following Judgement No.1. Peakwave argued that the Order had the effect of stripping the GP’s existing directors of all management powers, which it said had been transferred to the joint provisional liquidators. Mr Jiao disagreed, contending that the directors retained their management role and that the provisional liquidators’ powers were limited to asset protection and preservation.
Peakwave applied to vary the Appointment Order to give the joint provisional liquidators broad management and control powers across the entire corporate structure, including the right to override contractual arrangements in shareholders’ agreements at subsidiary level.
Does Appointing Provisional Liquidators Automatically Displace the Directors?
Justice Asif carefully considered English case law cited by Peakwave, including Re Mawcon Ltd, Re Union Accident Insurance Co Ltd, and Pacific and General Insurance Co Ltd v Hazell, which suggested that the appointment of a provisional liquidator for asset preservation purposes automatically terminates the directors’ powers.
However, Justice Asif concluded that these English authorities do not reflect the law of the Cayman Islands. Section 104(4) of the Companies Act provides that a provisional liquidator “shall carry out only such functions as the Court may confer on that person and that person’s powers may be limited by the order appointing that person“. It was held that directors retain all powers not expressly given to the provisional liquidators.
Construction of the Appointment Order
Applying established principles of construction — looking first at the natural and ordinary meaning of the words in the order and only turning to the judge’s reasons if the wording is ambiguous — Justice Asif concluded that the Appointment Order did not remove the GP’s directors’ management powers. The Order directed the provisional liquidators to act as “watchdogs,” protecting and preserving assets and preventing mismanagement, while the directors continued to manage the GP.
This conclusion was supported by the Order’s reference to the GP’s “management” (not “former management”) being required to assist the provisional liquidators, and by the Court’s own prior indication that the provisional liquidators’ powers should be “strictly limited to what is absolutely necessary.”
The Court refused to give the provisional liquidators authority to take over the GP’s participation in the HKIAC arbitration, noting that the GP’s only role in the arbitration was to give discovery and that any issues in that regard could be addressed through the tribunal or the supervisory court. The Court also refused to grant the provisional liquidators broad shareholder-level powers over the subsidiary companies or the ability to override contractual restrictions in shareholders’ agreements, noting that the Court has no jurisdiction to order provisional liquidators, who have not been appointed over those subsidiary entities, to disregard the contractual arrangements at that level.
However, the Court did make two limited variations: (a) ordering that all correspondence regarding the HKIAC arbitration be copied to the joint provisional liquidators for their information; and (b) granting them the power to communicate with third parties and to collect, inspect, and copy the GP’s books and records in order to ascertain the status and whereabouts of the GP’s assets.
Section 54 of the Arbitration Act 2012
An important aspect of the second judgment is the Court’s approach to the question of interim relief once an arbitration is on foot. Justice Asif accepted Mr Jiao’s argument that section 54 of the Arbitration Act 2012 now controlled the extent to which the Grand Court should be willing to make interim orders. The overriding principle under section 54 is that the court should only intervene as a last resort, where appropriate relief is not available, or not available in time, from the arbitral tribunal or from the courts of the seat of the arbitration. The Court therefore declined to grant an injunction restraining Mr Jiao from diverting dividends, concluding that Peakwave had sufficient time to apply to the tribunal or the Hong Kong court for such relief.
Key Takeaways
The Grand Court will protect assets even during arbitration. Where there is a genuine risk of asset dissipation or misconduct, investors are not left without recourse simply because they have agreed to resolve disputes through arbitration. The Court can and will appoint provisional liquidators to safeguard assets pending the outcome of the arbitration, provided the statutory test is met.
Provisional liquidators’ powers will be carefully controlled. The Court will not use the appointment of provisional liquidators as a vehicle to hand control of a company or its corporate group to one party in advance of the tribunal’s determination of the merits. The powers granted will be limited to what is strictly necessary, and the Court will be vigilant to ensure that the provisional liquidators do not encroach on the tribunal’s fact-finding jurisdiction.
Directors’ powers are not automatically displaced in the Cayman Islands. Unlike in certain English authorities, the appointment of provisional liquidators in the Cayman Islands does not automatically terminate the directors’ management powers. The court must specify in its order which powers are given to the provisional liquidators, and which remain with the directors.
The arbitration framework must be respected. Once arbitration is underway, the Court will apply section 54 of the Arbitration Act 2012, treating its power to grant interim relief as one of last resort. Parties should look first to the arbitral tribunal or the courts located in the seat of the arbitration for interim measures.
Conclusion
The Peakwave decisions provide a clear and practical framework for how the Cayman Islands Grand Court will balance the need to protect company assets with the need to respect parties’ agreements to arbitrate their disputes. For investors and fund managers with interests in Cayman Islands vehicles, the message is reassuring: the Grand Court has the tools and the willingness to intervene to prevent asset dissipation and misconduct, but it will do so while keeping the provisional liquidators’ role proportionate and preserving the primacy of the arbitral process.
Conyers acted for the successful petitioner, Peakwave Investment Management Limited, in both hearings.