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Under Bermudian law, the scheme of arrangement (“scheme”) is the principal tool for effecting restructurings.
However, in relation to groups of companies which have substantial operations and creditors in the USA, the
preferred route for restructuring is proceedings under chapter 11. Therefore, Bermuda has developed the
practice of effecting restructurings of companies or groups of companies which are amenable to the
jurisdiction of the US Courts and which include Bermudian companies, by way of parallel chapter 11
proceedings and provisional liquidation proceedings in Bermuda; with a view to the restructuring being
effected by a plan of reorganisation in the chapter 11 proceedings and (where necessary) parallel schemes in
Bermuda in respect of the Bermudian companies in the group.
Winding‐up proceedings are commenced in Bermuda and provisional liquidators appointed in respect of the
Bermudian companies, at the same time as chapter 11 proceedings are commenced in the relevant district of
the US Bankruptcy Court in respect of all the group companies involved in the restructuring, including the
Bermudian companies. The provisional liquidation facilitates the chapter 11 restructuring. A key aspect is that
upon the presentation of the petition and appointment of the provisional liquidators, a statutory moratorium
against creditor actions comes into effect and supports the moratorium imposed by the chapter 11
proceedings.
Under the order appointing the provisional liquidators, the board of directors is allowed to continue to control
the company’s business, and the provisional liquidators’ powers are limited to the role of overseeing the board
in their continuation of the business and in effecting a reorganization of the company, under the supervision of
the Bermudian and US Courts. The hearing of the winding‐up petition is adjourned.
In addition to facilitating the restructuring the provisional liquidators’ role is to ensure that the restructuring
efforts are only allowed to continue as long as this remains in the interests of the creditors of the Bermudian
companies. The provisional liquidators report regularly to the Bermuda Court on the progress of the
restructuring and if they consider that the board is not acting in the best interests of the company and its
creditors, they can seek an appropriate order from the Court.
In the matter of ICO Global Communications (Holdings) Limited there were parallel proceedings in the USA,
Bermuda and the Cayman Islands. There was a challenge to the jurisdiction of the Bermuda Court to make the
order appointing provisional liquidators with the role outlined above. In dismissing the challenge, the Chief
Justice gave a judgment in which he approved the use of parallel proceedings. He considered that the Court
had a wide discretion under Bermuda’s company law to make the order. He did not accept that a chapter 11
reorganisation would, by its very nature, destroy the rights of creditors and shareholders or that the Bermuda
Court should necessarily claim primacy in winding‐up proceedings affecting a Bermudian company. He
considered that where the aim of proceedings was to enable a refinancing of the company the Bermudian
Court “should co‐operate with Courts in other jurisdictions which have the same aim in relation to the affairs of
the company”. And that it was not a question of surrendering jurisdiction so much as “harmonisation of
effort”.
Once the restructuring has been formulated by management and approved by the provisional liquidators, it is
effected by a plan of reorganisation in the chapter 11 proceedings and (where necessary) schemes in Bermuda.
The plan compromises the claims of the creditors of the companies subject to chapter 11 proceedings, and the
schemes act as a further protective mechanism by compromising the claims of creditors who may not be
bound by the plan as a result of not being subject to the jurisdiction of the US Court.
3. Recognition of Foreign Proceedings in Respect of a Bermudian Company
In the matter of Dickson Group Holdings Limited [2008] Bda L.R. 34 the issue of recognition of foreign insolvency
proceedings in respect of a Bermudian incorporated company was considered. A winding‐up order had been
made against a Bermudian incorporated company and permanent liquidators appointed by the Hong Kong
Court. The liquidators then applied in the Bermuda Court for leave to promote a scheme of arrangement in
Bermuda in parallel with a Hong Kong scheme of arrangement. The Bermuda Court acknowledged that it had
co‐operated with foreign insolvency Courts in the context of restructurings where a Bermudian company has
been subject to parallel proceedings in Bermuda and the US. The Bermuda Court considered it unprecedented
to recognise and enforce insolvency orders of a foreign Court in respect of a Bermudian company where there
no parallel proceedings were commenced in Bermuda and the foreign proceedings were a “full blown”
liquidation rather than a restructuring. However, the Court granted recognition to the Hong Kong proceedings
and granted the application for leave to promote the scheme on the basis that it was being asked to assist the