From conflict to resolution: Tackling international shareholder challenges

The Client

We worked with a UK-based solicitor acting on behalf of a shareholder and creditor of a British Virgin Islands (BVI) registered company. This company, managed out of Jersey through nominee directors, was involved in a property development project in Dubai but faced significant challenges.

A dispute between shareholders had created a deadlock in management, preventing any progress. Additionally, the company suffered a significant financial loss due to poor legal advice obtained from a Dubai-based firm of solicitors. The shareholder and their solicitor approached Menzies (HLB UK) for expert guidance to attempt to recover the shareholder's loss.

The Assignment

Our role was to devise a strategic solution to help the shareholder overcome these obstacles. After in-depth consultations and thorough research into the circumstances surrounding what appeared to be suspect transactions, it transpired that the cause of the problem was poor legal advice provided by a Dubai based firm of lawyers and that the Dubai based firm operated as a branch of a UK registered firm. On further review, this provided an opportunity to pursue a claim against the lawyers in the UK rather than having to incur the substantial costs of suing them locally in Dubai.

The devised strategy involved leveraging the debt element of the shareholder’s investment to petition for the company’s winding up in the UK High Court. This was based on the presence of an asset in the UK jurisdiction, specifically a "chose in action" (legal claim against a third party).

Once we were appointed as liquidators, our task grew more complex due to opposition from other stakeholders and logistical challenges in pursuing litigation. We used our liquidators’ powers in the UK to access and review the files of the Dubai-based firm. With the assistance of legal professionals in the UK and Dubai, and backed by a favourable Counsel’s opinion, we secured after-the-event (ATE) insurance and litigation funding to advance the case.

The Value We Created

Despite the legal and procedural challenges, our team worked diligently to fulfil our duties as liquidators. Through skilled negotiation and promoting collaboration among stakeholders, we resolved the case prior to trial. This resulted in substantial recoveries that flowed through to the company and its creditors, achieving a positive outcome against unfavourable odds.

Our involvement provided a solution where progress had previously hit a stumbling block and ensured financial restitution for those impacted by the poor legal advice.  By combining our insolvency and litigation expertise with innovative strategy and international capabilities, we demonstrated the significant value HLB can deliver in complex, cross-border challenges of this type.