BRITISH VIRGIN ISLANDS
COURT OF APPEAL
INSOLVENCY ACT – BVI APPEALS – WHETHER ASSIGNEE OF REDEMPTION PROCEEDS CAN ATTAIN THE CHARACTER OF A CREDITOR WITH LOCUS STANDI TO SEEK LIQUIDATION OF A COMPANY
Xena Investment Limited (“Xena”) applied for and was granted an order appointing joint liquidators over Spectrum Galaxy Fund Ltd (“Spectrum”) on the basis that Xena, as an assignee of redemption proceeds had locus standi to seek the liquidation of Spectrum. Spectrum appealed. The sole question arising on the Appeal was whether an assignee of redemption proceeds stood in a better position than the redeeming shareholder and by virtue of the assignment attained the character of a creditor with locus standi to seek the liquidation of a company.
The Court followed its previous decision in Westford Special Situations Fund Limited -v- Barfield Nominees Limited et al and allowed the Appeal. It held that a claim for redemption proceeds is precluded by virtue of Section 197 of the Insolvency Act (the “Act”) from being an admissible claim and caught by the prescription contained in Section 12(c) of the Act. Section 197 provides that a “ … member and a past member, of a company may not claim in the liquidation of a company for a sum due to him in his character as a member, whether by way of dividends, profits, redemption proceeds or otherwise…”.