Holt Fund SPC: Guidance on End of Appointment Matters for Restructuring Officers

In a Nutshell

The Grand Court (the “Court”) has considered for the first time the principles that apply to applications for the discharge of and remuneration of joint restructuring officers (“JROs”). Confirming that JROs may recover reasonable fees for proper work undertaken even if the restructuring fails. The approach of the Court when determining liquidators fees provides a useful guide to JRO fee applications.

Background

This decision of the Court addresses the application by the JROs of Holt Fund SPC for approval of their remuneration and for discharge of their appointment. The JROs, had been appointed in in respect of two segregated portfolios (SP02 and SP03) of Holt Fund SPC, an investment fund regulated by the Cayman Islands Monetary Authority (“CIMA”). The appointment was made under section 91B of the Companies Act (2023 Revision) (the “Companies Act”).

Following agreement between the JROs and the company’s management that the restructuring proposal could not be implemented, the JROs applied for approval of their fees and for discharge of their appointment. Notice of the application was given to stakeholders and CIMA. Only two responses were received: Individual A raised queries that were addressed, while Individual B objected to the discharge on the basis of a need for further investigation into the company’s affairs. To protect confidentiality, the Court granted a sealing order over certain documents containing personal details of the respondents, in line with the Companies Winding Up Rules (2023 Consolidation) (“CWRs”).

Legal Principles – Fee Approval

The Court considered the statutory framework under the Companies Act, and the CWRs. Section 91D(6) of the Companies Act requires the Court to fix the remuneration of restructuring officers, and section 109 provides that such remuneration, if properly incurred, is payable out of the company’s assets with priority in the event of a subsequent winding-up. CWR Order 1A rule 10 and the application of the Insolvency Practitioners’ Regulations (2023 Consolidation) inform the process and standards for fee approval. It also found that the approach taken by the Courts to liquidations serves as a useful guide to JRO remuneration applications.

The Court emphasised that restructuring officers are entitled to be compensated for their work, even where the restructuring does not succeed, provided the fees are properly and reasonably incurred. The Court’s role is to ensure a prima facie case for approval is made and that there is nothing “eyebrow-raising” about the level of fees and expenses, particularly where there are no substantive objections from stakeholders.

Legal Principles – Discharge of JROS

Section 91E of the Companies Act provides that the company, the restructuring officers, creditors, contributories, or CIMA may apply for variation or discharge of the order appointing restructuring officers. The Court has broad discretion, save that it may not order liquidation on such an application. The purpose of the restructuring officer regime is to facilitate restructuring; where a consensual restructuring is no longer viable, discharge is appropriate. Any need for investigation into mismanagement is a matter for a liquidator in winding-up proceedings, not for restructuring officers.

Decision

The Court approved the JROs’ remuneration for requested period, to be paid out of the assets of the relevant portfolios. The application for discharge of the JROs was also granted. The Court found that the restructuring proposal was not viable, the JROs had acted properly and reasonably, and the application was supported by management and stakeholders with standing. The objection by Individual B was dismissed on the basis that the matters raised fell outside the scope of the JROs’ duties and would be more appropriately addressed in winding-up proceedings, should stakeholders wish to pursue that route. The Court noted that discharging the JROs would end the statutory moratorium on proceedings against the company, thereby facilitating any future winding-up petition or investigation by a liquidator if required.

¹ [2025] CIGC (FSD) 11