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Provisional Liquidators, the Automatic Stay, and the Hong Kong Court

January 2021 Ben HobdenNorman Hau

This article considers the approach taken by the Cayman Court when faced with an application by a company to appoint ‘soft touch’ provisional liquidators and obtain the benefit of the statutory moratorium when proceedings are extant in another jurisdiction, and a recent decision of the Hong Kong Court providing an indication of how such an application for recognition of the appointment and stay will be dealt with in Hong Kong.

Section 97(1) of the Companies Act provides:

“When a winding up order is made or a provisional liquidator is appointed, no suit, action or other proceedings, including criminal proceedings, shall be proceeded with or commenced against the company except with the leave of the Court and subject to such terms as the Court may impose.”

The statutory moratorium that arises as a consequence of it means that the appointment of a ‘soft touch’ provisional liquidator has long since been an attractive option available to Cayman Islands’ companies that find themselves in financial distress1. The appointment of a ‘soft touch’ provisional liquidator would result in a debtor company benefiting from the moratorium imposed by the Companies Act and provide it with much needed breathing space to enable it to attempt to restructure its debts by way of scheme of arrangement or otherwise.



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Provisional Liquidators, the Automatic Stay, and the Hong Kong Court


Ben Hobden

Cayman Islands   +1 345 814 7366

Norman Hau

Hong Kong   +852 2842 9548
Mobile  +852 6469 3363

1 Such an application was first discussed in In the Matter of Fruit of the Loom (Unreported, 26 September 2000)


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