Claim No: CFI 013/2010
THE JUDICIAL AUTHORITY OF THE DUBAI INTERNATIONAL FINANCIAL CENTRE
In the name of His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Ruler of Dubai
IN THE COURT OF FIRST INSTANCE
BEFORE JUSTICE SIR JOHN CHADWICK
|DR ALFRED WIEDERKEHR & DR GEORG WIEDERKEHR
DIWAN CAPITAL LTD
||23 June 2010
Dr Gordian Gaeta for the Claimants
Mr Richard Bushman, CEO of Diwan Capital for the Defendant
||23 June 2010
1. This is an application in CFI 13/2010 made by Dr Alfred Wiederkehr and his brother Dr Georg Wiederkehr, lawyers resident in Switzerland. The applicants are shareholders in a DIFC company, Diwan Capital Ltd. They have been represented before me by their attorney, Dr Gordian Gaeta.
2. The application is for the appointment of a Liquidator of Diwan Capital Ltd (“the Company”) It is common ground that, at an Extraordinary General Meeting held on 30 March 2010, it was resolved unanimously that the Company should be wound up. The resolution was passed at a meeting at which, it seems, all but one of the shareholders were present or represented by proxy and of which notice had been given to every shareholder in accordance with the requirements of the Articles. But, although resolving to wind up on 30 March 2010, the meeting did not appoint a Liquidator.
3. There is some question as to whether the winding up which commenced on 30 March 2010 is a members’ voluntary winding up or a creditors’ voluntary winding up. That question turns on whether or not there was, in advance of the resolution, a statutory declaration of solvency under Article 31 of the DIFC Insolvency Law No.3 2009. To comply with the Law, such declaration would have needed to be made during the five weeks immediately preceding the date of the passing of the resolution, or on that date and before the passing of the resolution. I have been shown what purports to be a Resolution of the Board of Directors dated 15 March 2010. That Resolution does contain a declaration of solvency. But Dr Gaeta, on behalf of the applicants—seeing this document for the first time—questions whether the purported Board Resolution was, in fact, a resolution in writing signed by all the relevant Directors.
4. That is not a question which I need to resolve at this hearing. If this were a voluntary winding up, then Article 33.1 requires that the Company appoint a Liquidator for the purpose of winding up its affairs. If it were not a members’ voluntary winding up, then Article 39 requires that the Company call a meeting of creditors at which a Liquidator be appointed. Whichever is the appropriate provision, the fact is that no Liquidator has been appointed.
5. The Company has proceeded on the basis that the Chief Executive Officer, Mr Richard Bushman, with a couple members of remaining staff, will conduct an informal liquidation: at least to the point of realising the Company’s assets to cash balances and satisfying its liabilities. What seems to have been contemplated was that, when that position was reached, the Company would appoint a Liquidator, in effect, to distribute the cash surplus of cash amongst the shareholders.
6. It is clear from what I have been told this morning, that that position is not likely to arise in the near future. The applicants have it in mind to commence proceedings against the company based on allegations of unfair prejudice. So long as these proceedings are threatened, there will be potential liabilities which prevent the simple distribution of assets as contemplated.
7. Article 46 of the Insolvency Law—in Chapter 4, provisions applying to both kinds of voluntary winding up—provides, at paragraph (1) that, if there is no Liquidator acting, the Court may appoint a Liquidator. I am satisfied that the present position cannot be allowed to continue. If a company is in liquidation with substantial assets—as this company has—then there should be a Liquidator who has responsibility for the conduct of its affairs and the distribution of assets.
8. In those circumstances, therefore, it seems to me necessary that a Liquidator of the Company be appointed; and I so direct.
9. The practical problem is that, although the Company had approached a partner in Ernst & Young who had indicated a willingness to accept appointment in a letter dated 31 March 2010, it is clear, first, that at the date the letter was written the proposed Liquidator did not appreciate that a winding up resolution had been already passed. The terms of the letter were inconsistent with that understanding on the part of the writer. Second, it is clear that the terms on which the proposed Liquidator would accept engagement were that, on liquidation—which, plainly, he thought was a future event—the only assets were bank balances and there would be no liabilities. Therefore, as a Liquidator, he would not be called upon to make any management decisions.
10. There is no reason why Ernst & Young should not be approached in order to ascertain whether they would take an appointment without those pre-conditions being satisfied; but I cannot assume that they would be willing to do so. It seems to me, in practice, a Liquidator is likely to require indemnities, or underwriting, from whoever seeks his appointment. Dr Gaeta has indicated that the applicants would be willing to make proposals to prospective Liquidators on that basis; and, in those circumstances, they should have the opportunity to do so.
11. Accordingly, I direct that this application is adjourned to the first convenient date on or after 4 July 2010. At the adjourned hearing, the applicants shall—if they are able to do so—put before the Court a nomination of their proposed Liquidator with a written consent from that Liquidator to act. Subject to any opposition to the Liquidator proposed by the applicants, I will direct that the appointment may be made by the Registrar; unless he takes the view that the matter should be brought before a Judge. The applicants are to give notice to the other shareholders in the Company with the name of the proposed Liquidator as soon as it is known. If all parties consent, then the appointment can be made at a date earlier than 4 July 2010.
Justice Sir John Chadwick
Date of Issue: 28 June 2010