We have previously blogged about the DPH liquidation. In the latest judgment, the BVI Court of Appeal upheld the appointment of BVI provisional liquidators in respect of a Swiss company and clarified that evidence of dissipation of assets (in the Mareva sense) may not be a pre-condition to the appointment of provisional liquidators (PLs).
KMG filed an application seeking the appointment of liquidators to DPH (a Swiss company) based on an unpaid arbitral award (US$200 million). KMG applied in BVI as DPH had assets in the jurisdiction (two wholly-owned BVI registered companies (the Subsidiaries)) and it would take at least two years to commence Swiss bankruptcy proceedings.
At first instance, DPH successfully argued that a Swiss liquidator could take control of the Subsidiaries remotely without the assistance of the BVI Courts outlining hypothetically how this would work (the Assistance Point). On that basis, it was ultimately held that KMG had failed to show that BVI was the appropriate forum and leave to serve out was set aside. The Court of Appeal rejected this; finding the suggestion that a Swiss liquidator could dispose of the Subsidiaries from an “armchair in Switzerland” to be flawed but more interestingly that the Assistance Point addressed the mechanics of a liquidation but was not relevant to the determination of forum.
The Court of Appeal further held that the key considerations were:
- the likely delay of two years in commencing Swiss bankruptcy proceedings;
- the fact that the Subsidiaries were the principal assets of DPH and no assets had been identified in Switzerland; and
- KMG’s position as the most substantial creditor and its wish to pursue a BVI liquidation.
As for the validity of the PLs’ appointment, the Court of Appeal found that evidence from public searches had established the speed at which DPH could transfer assets from jurisdiction to jurisdiction (in one instance, shares in a European subsidiary had been transferred twice in a 35 minute window). The Court of Appeal examined the meaning of the “risk of dissipation” finding that dissipation in the “Mareva sense”/evidence of asset-stripping was not necessary (Re a Company, ex parte Nyckeln Finance Co. Ltd applied); the test was whether there was a serious risk that the DPH assets might not continue to be available, which was satisfied here.