‘NO ROOM FOR IMPERMISSIBLE SHORTCUTS’: CAYMAN ISLANDS COURT CLARIFIES WHO HAS STANDING TO WIND-UP A NOTES ISSUER
In In the Matter of Shinsun Holdings (Group) Co. Ltd. (2022), the Grand Court of the Cayman Islands dismissed a winding-up petition presented by the petitioner Shenwan Hongyan Strategic Investments (H.K.) Limited, on the basis that it lacked standing.
Shenwan was an investor that purchased publicly issued US dollar-denominated senior notes. The notes were issued by Shinsun Holdings (Group) Co. Ltd., a Cayman Islands incorporated company listed on The Stock Exchange of Hong Kong Limited. The notes were not held in the name of Shenwan but in the name of CCB Nominees Limited, the registered holder of the note.
The notes were issued and held through a legal and financial structure known as an ‘indirect holding system’ or a ‘global notes structure’. This structure is a sophisticated layered arrangement involving issuer, trustees, depositories, nominees, clearing systems, registered holder and participants. In this structure, the notes are registered in the name of a single registered holder and investors (either on their own or through brokers) purchase interests in the notes and do not hold such notes in their own name.
It has been said that the ‘no look through’ principle applies to this system of holding notes in global form. This structure has been a staple of the Asian bond market for over a decade, with real estate and property development companies operating in Mainland China constituting the lion’s share of these issuances. However, it has only been subject to intense interest and scrutiny in the past 18 months following a liquidity crunch affecting the industry.
Jul-Sep 2023 issue
Sidley Austin