In Ctrip Investment Holding Ltd v eHi Car Services Limited the Cayman Islands Court delivered a warning to shareholders seeking to use the winding up jurisdiction to advance their own individual commercial interests. A shareholder's just and equitable winding up petition was struck out as an abuse of process on the basis that: (i) the shareholder was not seeking to protect the interests of shareholders as a class, but was instead seeking to promote its rival and unsuccessful bid to take the company private by way of a merger; and (ii) the shareholder had more suitable alternative remedies – such as voting against the approval of the successful bid at the EGM to approve the merger or exercising statutory dissenter appraisal rights. The shareholder was ordered to pay the company's costs of defending the winding up petition.
Importantly the Court provided confirmation that:
- The principles applicable to Cayman Islands just and equitable winding up proceedings are no different from other jurisdictions which have a specific minority shareholder oppression remedy; and
- In order to vitiate a board resolution (in this case the approval of the successful bid), it is insufficient to demonstrate that the decision was to some extent "infected" by an improper purpose. The correct legal position is that the substantial purpose for which the power was exercised must be improper. The Court acknowledged that the minority judgment in Eclairs Group Ltd v JKX Oil and Gas plc  UKPC 71 suggested a stricter test (i.e. an improper purpose which was a causative albeit not dominant reason would invalidate the decision). In any event, on either test, the board resolution would not be vitiated because the evidence did not demonstrate any improper purpose on the part of the company's board.
A copy of the judgment can be found here.