Asset-Freezing Injunctions: Can Dividends To Shareholders Be “Ordinary Course” Payments?

The Grand Court of the Cayman Islands has recently granted a Mareva Injunction in the case of KTH Capital v. China One et al against a Cayman registered company controlled by Morgan Stanley. In so doing, the Court had to grapple with the novel defence raised by the Company that, as a special purpose vehicle, the sole purpose for the Company’s incorporation was to act as a conduit for the repatriation of its shareholders’ indirect investment in a distressed debt portfolio acquired by the Company’s subsidiary in the People’s Republic of China. In these circumstances, it was argued that the distribution of dividends by the Company to its shareholders was in the ordinary course of the Company’s business and that such distributions were accordingly not liable to be restrained by Mareva Injunction.