Spotlight on the Caribbean: Local and global connectivity in action

Offshore centres in the Caribbean, such as the British Virgin Islands (BVI), have long been popular choices for Far East and South East Asian businesses looking to set up holding companies or investment funds. These business-friendly Caribbean jurisdictions offer the advantages of fast and flexible incorporation and stable legal, judicial and political environments, along with potentially favourable tax regimes.

The links with China, Hong Kong, Singapore, Malaysia and Vietnam, amongst other jurisdictions, exemplify the intercontinental connections running along this Asia-Pacific corridor. If we look at the BVI as an example of this global reach, 57% of the jurisdiction’s business originates from China and the Asia Pacific region.

However, if funds and companies run into financial or operational challenges, the complexity of these multinational corporate structures can make tracing and recovering assets exceptionally challenging. The same is true if creditors are seeking to enforce judgements against Caribbean respondents. The challenges of cross-border insolvency and asset recovery can be compounded by organised efforts to conceal assets, such as the sale or transfer of assets through multiple transactions involving various offshore entities. In these situations, timely specialist investigative support is crucial in clawing back assets for the benefit of creditors.

How easy is it to secure recovery?

Jurisdictions such as the BVI and Cayman Islands have extensive tool kits for dealing with a wide range of cross-border recovery scenarios. These offshore centres are generally considered ‘creditor-friendly’ jurisdictions given the wide range of restructuring and insolvency tools at the disposal of these parties.

Looking at the BVI as an example, the Insolvency Act 2003, the Insolvency Rules 2005 and the Business Companies Act 2004 provide the legal frameworks for various formal insolvency and restructuring procedures. These include provisional liquidation, insolvent liquidations, the appointment of administrative receivers, company restructuring and reorganisation, and voluntary liquidations.

Building on these legislative and judicial foundations, the keys to recovery success include timely action. Rapid initiation is especially important if a creditor suspects that funds have been misappropriated, as delays could allow more time and scope for funds to be hidden or dissipated.  

Liquidation is one of the most common and effective mechanisms for initiating asset investigation and recovery. A liquidator is often granted wide-reaching investigative powers that would not normally be available to a creditor, including access to significant information such as banking records and asset registers. As we have seen in our work as investigators and insolvency practitioners here at Quantuma, one of the other key advantages of liquidation is in enhancing the access and reach of forensic investigation.  

Where assets are controlled or have been transferred outside of the jurisdiction in which the liquidation has been initiated, a liquidator can seek to have their appointment and investigative powers recognised by the court in the jurisdiction in which the assets are now held, which provides a valuable aid to tracing and recovery.

The potential for asset dissipation is not limited to insolvent scenarios. For example, concerns may centre on management, shareholders or third parties. In these circumstances, the appointment of a provisional liquidator may be appropriate. If investigations conclude that assets have been misappropriated and this could jeopardise solvency, the company may subsequently be placed into official liquidation.

In turn, provisional liquidation can be used to aid a restructuring. The appointment of a ‘light -touch’ provisional liquidator can allow management to remain in place while the liquidators oversee and assist in the restructuring process. Looking specifically at the BVI as an example, orders can be issued to stay or restrain legal proceedings in the BVI High Court, the Eastern Caribbean Court of Appeal or the Privy Council to support a restructuring process, though this does not amount to a full statutory moratorium.

Other restructuring mechanisms in the BVI include Plans of Arrangement and Schemes of Arrangement, both governed by the BVI Business Companies Act 2004. A Plan of Arrangement would allow a company to reorganise, merge or dispose of assets without requiring insolvency proceedings, subject to Court approval. A Scheme of Arrangement would allow a company to reach a binding compromise with creditors or shareholders, requiring approval from a majority in number representing at least 75% in value of those affected. The Insolvency Act also provides for Creditors’ Arrangements (CA), allowing an insolvent company to negotiate a restructuring plan with creditors under the supervision of an insolvency practitioner. However, the CA is not as popular as a Plan of Arrangement and Scheme of Arrangement.

In the BVI, practitioners can also seek mutual recognition of restructuring processes initiated in  numerous designated foreign jurisdictions. These include the UK, US and Hong Kong, Singapore, Bermuda and the Cayman Islands.  

The BVI has not implemented the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency. However, alongside a number of other Caribbean offshore centres, the BVI courts take a pragmatic approach to cross-border issues and utilise many of the principles contained within the Model Law. The BVI has therefore emerged as an important global hub for restructuring and an effective legal bridge between Asia-Pacific and the UK and US.

How can you and your clients boost your chances of recovery

Our team at Quantuma is routinely called in to work on the most complex restructuring, insolvency and recovery cases across the Asia-Pacific corridor, with many involving the BVI and other offshore jurisdictions in the Caribbean. This gives us unique insights into what works, what doesn’t and why. Four priorities stand out:

1. Track down hidden assets  

   Forensic investigation is essential in tracing and recovering missing or misappropriated assets, with the trails often leading from the Caribbean to Asia-Pacific and beyond.

   Our forensic investigations are frequently conducted alongside insolvency mandates, leveraging the investigative and discovery powers available to court-appointed liquidators to maximise recoveries for creditors. This complementary approach ensures a robust asset tracing and investigation strategy, drawing on combined expertise in specialist areas of forensic accounting, advanced data analytics, and legal avenues to improve asset realisation prospects.

   Our investigative forensic accountants leverage a range of tools to trace assets and uncover financial misconduct. Traditional techniques include utilising forensic data analysis and investigative research to identify suspicious transactions, undisclosed relationships and fund flows across multiple jurisdictions. Drawing on the latest technological developments, we augment traditional investigative techniques with AI-assisted e-discovery and open-source intelligence analysis. This combination of technology and traditional investigative expertise allows us to take a faster and more closely targeted approach to evidence review and gathering, while helping to identify fact patterns and establish crucial links between seemingly unconnected people and evidence.

   Beyond these techniques, we assist in taking strategic legal actions to secure and recover assets. This includes applying for Norwich Pharmacal Orders to obtain disclosure from third parties, foreign recognition (such as Chapter 15 relief in the US), and freezing orders to prevent asset dissipation.

   The deployment of these techniques enables our investigation teams to make informed strategic decisions on which parties to target and where to pursue claims for asset recovery.

   Our cross-border experience ensures we can coordinate these efforts across multiple jurisdictions, navigating complex legal landscapes to pursue investigations, identify claims, mitigate losses and maximise recoveries for creditors.

   The benefits of forensic investigation can be seen in the ongoing liquidation of the Labuan-based City Credit Investment Bank and its Caribbean subsidiaries. Our forensic team has been playing a key role in tracing dissipated assets and tracking key individuals across multiple jurisdictions including Malaysia, Hong Kong, Indonesia, Japan, BVI and the Cayman Islands, as well as the UK and US.

2. Access on the ground expertise

   Many of the offshore centres in the Caribbean have important differences in their insolvency laws and the processes for international recognition and enforcement. Being able to work with insolvency practitioners based locally helps to provide a realistic understanding of the legal processes and possibilities on the ground.

   The value of this local presence can be seen in our urgent application for a provisional liquidation to protect a BVI-domiciled global food and agricultural business group against an uncontrolled enforcement process. Our client, who is the principal shareholder and CEO of the group, was concerned that the claims being made by a small number of creditors could allow them to gain an unfair advantage against others and lead to an inefficient and value-eroding process. Quantuma helped to prepare witness statements and direct counsel to support what proved to be a successful provisional liquidation application in the UK, Singapore and Dubai. Working with our global colleagues, we also managed relationships and communications with over 40 international banking and financial institutions.  

3. Reach out globally

   Alongside local knowledge, the complex multinational structures surrounding many restructuring and asset recovery cases underline the importance of collaboration across different jurisdictions.

4. Pick your jurisdiction

   For any multinational insolvency case, it is important to determine the centre of main interests (COMI) and seek to instigate initial proceedings in the relevant jurisdiction. However, within the complex multinational structures that are typical of these entities, determining the COMI is not always clear cut. That is why it is so important to unravel the entity structures and relationships between them to establish where the principal funds are held and key decisions are made. As we have seen in a number of cases, it may be necessary to initiate parallel proceedings in Caribbean and Asia-Pacific jurisdictions, underlining the importance of international collaboration.

Here to help

Our office in the BVI is one of more than 20 across our internationally integrated network of insolvency and restructuring teams, who work with investors, creditors and their legal representatives around the world to protect value and recover assets.

We work with clients to deal with all aspects of insolvency work, from distressed M&A to regulatory and contentious litigation and investigation. We recognise that complex situations involving multiple jurisdictions require a thorough understanding of the legal, commercial and cultural challenges at play in order to deliver the best outcomes.

Our global network brings together both the people on the ground and the international connectivity to manage complex cross-border assignments. Our hands-on approach and ability to collaborate closely across different jurisdictions greatly enhances the likelihood of success for our clients.

All our fees are tailored to the nature and complexity of the assignment. In addition to retainers, we can often offer flexible performance-related fee structures, including equity arrangements and milestone payments.

If you would like to discuss any of the issues raised in this article or find out how we can help you or your clients to trace and reclaim missing assets, please get in touch. 

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