In Re Constellation Overseas Ltd and others BVIHC (COM) 2018/0206, 0207, 0208, 0210 and 0212 (5 February 2019), the Commercial Division of the Eastern Caribbean Supreme Court confirmed for the first time that the BVI Court has jurisdiction to appoint soft touch provisional liquidators in support of a company's restructuring. The decision of Adderley J, described in the judgment as "believed to be the first application of its kind in the BVI", aligned the territory with the established practice of the Cayman Islands and Bermuda. Seven years on, the jurisdiction has matured into a settled feature of the BVI restructuring landscape, and it remains the closest thing the territory has to a debtor-in-possession rescue procedure.

Soft touch provisional liquidation

A soft touch provisional liquidation is one in which a distressed company remains substantively under the control of its directors while being protected from the claims of individual creditors, with court-appointed provisional liquidators supervising the company's efforts to restructure.

Provisional liquidation in its traditional form is an urgent protective measure. It is available only where an application for the appointment of a liquidator has been filed but not yet determined, and the court will classically make the appointment where the company's assets require protection against dissipation or impropriety on the part of management pending the determination of that application.

A soft touch appointment puts the same machinery to a different use. The company stays in the hands of its directors, and the protection from creditor action gives it "the opportunity to restructure its debts, or otherwise achieve a better outcome for creditors than would be achieved by liquidation" (Adderley J at [3]). It may be appropriate, the judge noted, precisely where there is no alleged wrongdoing by the directors, since the model depends upon existing management remaining in place under the supervision of the provisional liquidators. The primary purpose of such an application is to protect the companies from predatory creditors seeking to steal a march on the general body of creditors through satellite ex parte actions against the BVI entities, attempts which, the Court observed, had occurred in similar situations in the BVI on at least two prior occasions ([9]).

The statutory framework

The relevant powers are found in the Insolvency Act 2003. Under section 159 the Court may appoint a liquidator on the grounds set out in section 162, which include that the company is insolvent. Insolvency is defined in section 8 and includes cash flow insolvency, namely an inability to pay debts as they fall due, even where the company remains balance sheet solvent.

The power to appoint provisional liquidators under section 170 is not freestanding. It arises only where an application for the appointment of a liquidator has been filed and remains undetermined. The grounds in section 170(4) include that the company consents and that the Court is satisfied the appointment is necessary for the purpose of maintaining the value of the assets owned or managed by the company. Under section 170(5) the appointment may be made on such terms as the Court considers fit, and under section 171(1) provisional liquidators have the rights and powers of a liquidator to the extent necessary to maintain the value of the assets or to carry out the functions for which they were appointed, subject to the Court's power under section 171(2) to limit those powers in such manner and at such times as it considers fit.

Two further features of the BVI regime should be noted. First, unlike the position in England, there is no automatic moratorium upon the filing of a liquidation application; a stay of proceedings must be sought separately under section 174. Secondly, where a proposed appointee is a non-resident insolvency practitioner, prior written notice must be given to the Financial Services Commission under section 483.

The Constellation restructuring

The applicants were six BVI companies within the Constellation Oil Services group, an oil and gas drilling business experiencing financial distress attributable to the downturn in the offshore drilling sector, exacerbated by the recession in Brazil. The group was balance sheet solvent but, absent a restructuring, cash flow insolvent.

Given that Brazil serves as the operational centre of the group’s business, the restructuring was undertaken there. On 6 December 2018 the applicants and their affiliates filed a petition for a jointly administered judicial reorganisation (recuperação judicial, or RJ) before the First Business Court of Rio de Janeiro. On the same day, ancillary proceedings were commenced in the US Bankruptcy Court for the Southern District of New York under Chapter 15 of the US Bankruptcy Code, seeking recognition of the RJ as the foreign main proceeding of each debtor. The BVI applications followed, seeking the appointment of joint provisional liquidators over the BVI entities on a soft touch basis together with a stay of proceedings.

The application enjoyed remarkable creditor support. Creditors holding over US$1 billion of the group's US$1.5 billion of third-party debt supported the reorganisation, including Banco Bradesco S.A., the single largest unsecured creditor at approximately US$152.6 million, and the Consenting A/L/B Lenders, a consortium led by HSBC (USA) NA and Citibank NA which had advanced loans in the order of US$600 million. The valuation evidence was equally striking; the Houlihan Report before the Court showed a difference of some US$700 million between the group's break-up value and its value as a going concern ([87]).

Notably, Adderley J was careful to characterise the application as "a wholly domestic remedy under the IA" ([8]). It was not an application for recognition of a foreign insolvency proceeding under section 457, and it did not engage the cross-border insolvency provisions in Part XVIII of the Act, which were enacted in 2003 but deliberately never brought into force. The Court raised this issue of its own motion to satisfy itself that the application was not an attempt to obtain interim relief under those dormant provisions "through the back door" ([7]).

The decision

The judge undertook an extensive comparative survey. In England, the courts have long emphasised the flexibility of the jurisdiction; Sir Robert Megarry V-C observed in Re Highfield Commodities Ltd [1985] 1 WLR 149 that the statutory power "is in quite general terms" with "no hint in it that it is to be restricted to certain categories of cases", and Harman J noted in Re Andrew Weir Insurance Company Limited (1992, unreported) "a tendency to appoint provisional liquidators nowadays in cases where there are no suggestions of misfeasance or wrong-doing by the directors". In the Cayman Islands, Re Fruit of the Loom Ltd [2000] CILR Note 7b established the practice of appointing provisional liquidators in aid of a restructuring before it was codified in 2007, and in Bermuda a settled practice of soft touch appointments in support of cross-border rescues developed through cases including Re ICO Global Communications (Holdings) Limited [1999] Bda LR 69, Up Energy Development Group Limited [2016] SC (Bda) 83 and Re Seadrill Limited [2018] SC (Bda) 30 Com, the last of these another offshore drilling group restructuring through Chapter 11 proceedings.

Drawing on these authorities, Adderley J held that the Court has "a very wide common law jurisdiction to appoint provisional liquidators to preserve and protect the assets owned or managed by the Company", a jurisdiction which "includes making such appointments to aid the company's reorganization including cooperating with cross border reorganizational efforts" ([89]). A similarly wide discretion exists under section 170 of the Insolvency Act 2003.

The restrictive Hong Kong authority of Re Legend International Resorts Limited [2006] 2 HKLRD 192, in which the Court of Appeal held that provisional liquidators must be appointed for the purpose of a winding up and "not for the purposes of avoiding the winding-up", was distinguished. Under section 167(1)(b) of the BVI Act the Court may dismiss a liquidation application even where a ground for appointment has been proved, from which it appears that the legislature did not intend every liquidation application to culminate in a winding up ([90]).

The threshold for such an appointment is relatively low. The Court does not have to be satisfied that a restructuring will in fact occur; it is sufficient that there is "some prospect" of promoting one (Re Esal (Commodities) Ltd [1985] BCLC 450; Re ARM Asset Backed Securities [2013] BCC 252). And where the company itself makes the application, the authorities suggest the appointment is "almost a matter of course" (Re Union Accident Insurance Co Ltd [1972] 1 All ER 1105).

The Court accordingly appointed joint provisional liquidators over each applicant on a soft touch basis and granted a stay under section 174. The directors remained in day-to-day control, with the provisional liquidators required to report to the Court at least every 60 days on the progress of the Brazilian and US proceedings, and encouraged to consider protocols for cross-border cooperation within the framework of the Judicial Insolvency Network Guidelines, adopted in the BVI with effect from 18 May 2017 by Practice Direction No 2 of 2017, made under Rule 8(2) of the Insolvency Rules 2005.

Developments since Constellation

The jurisdiction did not remain a one-off. The Constellation restructuring itself was carried through to completion in the BVI; in February 2020 the BVI Court sanctioned a creditor scheme of arrangement, itself a rarity in the jurisdiction, as part of the wider restructuring, with eleven BVI companies ultimately restructured through the combination of the soft touch provisional liquidation, the Brazilian judicial reorganisation, the BVI scheme and Chapter 15 relief in the United States. The procedure had therefore proved itself not merely as a holding measure but as a platform from which a restructuring could actually be implemented under BVI law.

The pattern was repeated in Re All Year Holdings Limited. The company, a BVI holding company for a substantial New York real estate group, filed for Chapter 11 relief in the Southern District of New York on 8 December 2021, and soft touch joint provisional liquidators were appointed by the BVI Commercial Court at an urgent hearing on 20 December 2021. Jack J observed that provisional liquidations were becoming more common as a result of Constellation, and the group, with assets valued at over US$1 billion against some US$1.6 billion of bond debt, was ultimately restructured and sold through a court-approved BVI plan of arrangement effecting a squeeze-out merger. The case illustrates both the speed with which the BVI Court will act, twelve days from Chapter 11 filing to appointment, and the way the soft touch appointment now slots into a recognised sequence alongside the restructuring tools in the BVI Business Companies Act 2004. Restructuring activity in the BVI has continued apace into 2025, dominated by distress in the Chinese real estate sector, with the Kaiser restructuring implemented across Hong Kong, the Cayman Islands and the BVI.

The jurisdiction nonetheless remains a creature of case law. Practitioners have expressed the hope that the Court's jurisdiction to appoint soft touch provisional liquidators with a restructuring mandate will in due course be placed on a statutory footing, but that has not yet occurred. The contrast with the Cayman Islands is now pronounced; since 31 August 2022 a Cayman company has been able to petition for the appointment of restructuring officers under section 91B of the Cayman Companies Act, obtaining an automatic moratorium under section 91G upon the presentation of the petition, without any winding up application at all. The BVI's recent legislative attention has lain elsewhere; the Insolvency (Amendment) Act 2024, in force from 2 January 2025, expanded the grounds on which the Financial Services Commission may seek the appointment of a liquidator in cases involving money laundering, terrorist financing or sanctions breaches, and the list of relevant foreign countries for cross-border assistance under Part XIX was significantly expanded in 2024, but the restructuring jurisdiction itself remains as Adderley J found it. A BVI soft touch appointment therefore still requires the filing of a liquidation application as its statutory gateway, with the stay sought separately under section 174.

One practical caveat has also emerged from Hong Kong. In Re RZ3262019 Limited [2022] HKCFI 3602, Harris J confirmed that provisional liquidators appointed in the BVI as the place of incorporation, rather than in the company's centre of main interests, will not be granted the recognition and assistance which the Hong Kong courts generally extend to liquidators appointed in the COMI. Since the COMI of a BVI holding company will almost invariably lie elsewhere, the reach of a BVI soft touch appointment in Hong Kong, a jurisdiction central to much of the current restructuring activity, cannot be assumed and should be considered at the planning stage.

Key takeaways

1. The BVI offers a tested court-supervised rescue mechanism. Constellation established the jurisdiction and All Year Holdings confirmed it, with the BVI Court acting at speed to protect group structures while restructurings proceed in the group's centre of main interests, and with BVI schemes and plans of arrangement available to implement the outcome.

2. Preparation and creditor engagement are decisive. The appointment in Constellation was supported by evidence of cash flow insolvency, a credible restructuring plan with a realistic prospect of success, substantial creditor support and valuation evidence demonstrating a US$700 million going concern premium. An applicant who can assemble that evidential picture, and who attends to the procedural requirements of the Act, including the consent of the proposed appointees and notice to the Financial Services Commission for non-resident practitioners, will find the Court receptive.

3. The jurisdiction has limits that careful structuring must anticipate. It remains uncodified, it requires a liquidation application as its gateway, there is no automatic moratorium, and recognition of BVI-appointed provisional liquidators abroad, particularly in Hong Kong, cannot be taken for granted. The provisional liquidators remain officers of the court, and the Court made clear that it "will be alive to the need" that they "preserve and not facilitate any dissipation or misuse of the assets of the companies to the detriment of creditors or facilitate mismanagement on the part of directors" ([91]). The procedure is a tool for corporate rescue, not a shelter for hopelessly insolvent companies seeking simply to continue trading.

Note: This is a general summary of an evolving field of law, and is made available for general discussion purposes only between CANDEY and its clients and prospective clients. This memorandum does not constitute legal advice and must not be relied on as such. It should also not be cited as legal or academic authority.

CANDEY is a boutique litigation law firm that has extensive experience and resources to evaluate and advise on cross-border insolvency and restructuring issues, including the appointment of provisional liquidators in the BVI. David Harby, a partner in our BVI office, is very used to working with US counsel in making Chapter 15 applications and has often been called on to provide expert evidence on BVI law in relation to the same.

[1] Re Constellation Overseas Ltd and others BVIHC (COM) 2018/0206, 0207, 0208, 0210 and 0212 (5 February 2019) (Adderley J).

[2] Ibid [1].

[3] Ibid [3].

[4] Ibid [9].

[5] Insolvency Act 2003 (Revised Edition 2020).

[6] Constellation (n 1) [87].

[7] ibid [8].

[8] ibid [6]–[7].

[9] Re Highfield Commodities Ltd [1985] 1 WLR 149, cited in Constellation (n 1) [51].

[10] Re Andrew Weir Insurance Company Limited (HC, 1992, unreported), cited in Constellation (n 1) [54].

[11] Re Fruit of the Loom Ltd [2000] CILR Note 7b, discussed in Constellation (n 1) [63]–[68].

[12] Re ICO Global Communications (Holdings) Limited [1999] Bda LR 69; Up Energy Development Group Limited [2016] SC (Bda) 83; Re Seadrill Limited [2018] SC (Bda) 30 Com, discussed in Constellation (n 1) [73]–[77].

[13] Constellation (n 1) [89].

[14] Re Legend International Resorts Limited [2006] 2 HKLRD 192, distinguished in Constellation (n 1) [90].

[15] Re Esal (Commodities) Ltd [1985] BCLC 450; Re ARM Asset Backed Securities [2013] BCC 252, cited in Constellation (n 1) [56].

[16] Re Union Accident Insurance Co Ltd [1972] 1 All ER 1105, cited in Constellation (n 1) [57].

[17] ECSC Practice Direction No 2 of 2017, made under r 8(2) of the Insolvency Rules 2005.

[18] Ogier, 'Constellation: A Dazzling Success for BVI Restructuring' (2020) https://www.ogier.com/news-and-insights/insights/constellation-a-dazzling-success-for-bvi-restructuring/ accessed 12 June 2026.

[19] Re All Year Holdings Limited (BVI Commercial Court, 20 December 2021) (Jack J); Conyers, 'Joint Provisional Liquidators Appointed: All Year Holdings Limited' (2022) https://www.conyers.com/publications/view/joint-provisional-liquidators-appointed-all-year-holdings-limited/ accessed 12 June 2026.

[20] Conyers, 'Conyers BVI Advises All Year Holdings Limited Through Provisional Liquidation and Successful Restructuring' (2023) https://www.conyers.com/publications/view/conyers-bvi-advises-all-year-holdings-limited-through-provisional-liquidation-and-successful-restructuring-2/ accessed 12 June 2026.

[21] Chambers Global Practice Guides, Insolvency 2025: British Virgin Islands, Trends and Developmentshttps://practiceguides.chambers.com/practice-guides/insolvency-2025/british-virgin-islands/trends-and-developments accessed 12 June 2026.

[22] Legal 500 Country Comparative Guides, British Virgin Islands: Restructuring and Insolvencyhttps://www.legal500.com/guides/chapter/british-virgin-islands-restructuring-insolvency/ accessed 12 June 2026.

[23] Companies Act (Cayman Islands), ss 91B and 91G (in force 31 August 2022).

[24] Insolvency (Amendment) Act 2024; Carey Olsen, 'British Virgin Islands Restructuring and Insolvency 2026' https://www.careyolsen.com/insights/briefings/british-virgin-islands-restructuring-insolvency-2026 accessed 12 June 2026.

[25] Re RZ3262019 Limited [2022] HKCFI 3602; HFW, 'HFW Acts for BVI Provisional Liquidators in Contested Hong Kong Recognition Proceedings' (December 2022) https://www.hfw.com/about-us/news/hfw-acts-for-bvi-provisional-liquidators-in-contested-hong-kong-recognition-proceedings-dec-2022/ accessed 12 June 2026. 

[26] Constellation (n 1) [91].