Schemes of Arrangement are often used as a successful
restructuring tool, whether by way of a scheme promulgated in a
company's home jurisdiction or overseas. One criteria that
must generally be satisfied is that the scheme will substantially
achieve its purpose in the key jurisdictions in which the company
has liabilities or assets. The court does not need certainty as to
the position under foreign law but will need to be satisfied that
it will not be acting in vain in sanctioning a scheme.
So, what does this mean in practice? Whilst a hot topic,
currently most common law jurisdictions, including the Cayman
Islands and we understand, Hong Kong, adopts the English
“rule in Gibbs” where, put simply, a debt is treated as
discharged only if compromised within the law of the jurisdiction
governing the debt (with the exception that it is binding on those
who submit to the jurisdiction where a scheme is being
promulgated).
