Key Points

Directors are often caught between the interests of creditors and shareholders.

Their duties may sometimes lead them to need to seek the winding up of the company.

There is a divergence of approach to their powers to do so across the off shore jurisdictions, which differ from the UK position.


The inclusion of an offshore vehicle in an investment structure will give rise to competing interests and duties in circumstances where there is no longer enough money to pay every creditor in the chain. Those behind the structure will wish to limit the ability of the directors of the off shore vehicle to act in a manner that is contrary to the overarching scheme of the investment. However, the directors will still generally owe fiduciary duties to the company over which they have been appointed. When the company is in financial difficulties the interests of its creditors become paramount. This may lead the directors to conclude that the interests of the creditors are best served by putting the company into an insolvency process. Whether the directors unilaterally have power to take that step will fundamentally affect the viability of the investment structure.

A recent change of judicial approach in the Cayman Islands provides the opportunity to consider the different approaches in some of the key off shore jurisdictions. In each of these jurisdictions shareholder approval is needed for the directors to petition for the winding up of a solvent company, but a divergence is notable when the company is insolvent. Although all of the jurisdictions recognise that the embodiment of the company’s best interests (and therefore the assessment of a director’s fi duciary duties)changes from the contributories to the creditors when a company enters the zone of insolvency, there is a marked difference between those jurisdictions that restrict the directors’ powers (Cayman, BVI and Isle of Man subject to developing case law), those that expressly give the directors powers to bring the company to an end (such as the Channel Islands) and those that interpret the legislation in accordance with the directors’ wider duties (such as Bermuda).

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Key Contacts

Mark Holligon

Global Practice Group Co-Head of Dispute Resolution : Isle of Man

T +44 (0)1624 647 691
E Email Mark

Jared Dann

Group Partner: Jersey

T +44 (0)1534 818 313
E Email Jared

Fraser Robertson

Group Partner: Jersey

T +44 (0)1534 818 032
E Email Fraser

Andrew Willins

Partner: BVI

T +1 284 393 5323
E Email Andrew

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