Security Enforcement: When to Assess the Authority of a Director’s Signature

The Cayman Islands Grand Court had to decide whether the authority of a director signing an undated share transfer form should be assessed at the date of execution of the form or when the form was subsequently dated for the purposes of enforcement. The question was looked at in the case of Yeung Ka Man v OP Multi Strategies Investment Fund [2025] CIGC (FSD) 20.

Background

In 2020, HSBC loaned funds to Sino-Ocean Capital Holding Limited (“the Borrower”). In 2023, HSBC took additional security via an equitable mortgage over shares in OP Multi Strategies Investment Fund (“the Defendant”), which were owned by a BVI company called Glory Class Ventures Limited (“Glory Class”). As part of the mortgage, Glory Class provided an undated share transfer form, which was signed by one of its directors, Chan Ka Man (“Mr Chan”) on 6 April 2023. In January 2024, the Borrower defaulted on a US$52 million loan repayment, triggering enforcement. Receivers were appointed (“the Receivers”) and one of the receivers, Yeung Ka Man (“Mr Yeung”), signed the share transfer form on 5 July 2024, for the purpose of registering the charged shares in their name.

The Arguments

Glory Class objected, arguing Mr Chan was no longer a director on 5 July 2024, and lacked authority to execute the transfer form. In support of its argument it cited a clause requiring a new director’s signature within ten days if the original signatory resigned. The Receivers argued that Mr Chan’s authority was valid when he signed the share transfer form in 2023.

Court Ruling

The Grand Court granted the Receivers’ application to rectify the Defendant’s register of members, registering the shares in Mr Yeung’s name. Justice Kawaley ruled that requiring the signatory to be a director at the time of enforcement would undermine the commercial practice of using undated transfer forms. These forms are signed at the time the mortgage is created to avoid the need for the mortgagor’s cooperation during enforcement. The terms of the mortgage permitted Receivers or Mortgagee to date and execute the transfer form, and the clause that required the signature of a new director within ten days if the original signatory resigned did not invalidate a previously authorised signature.

Takeaways

The decision reflects a creditor-friendly approach to enforcing equitable share mortgages in the Cayman Islands and is significant because it upholds the practical use of undated transfer forms, ensuring lenders can enforce their security interests without having to obtain further consent from the mortgagor. Although not binding on the BVI courts, the decision also sets a useful precedent for the BVI where the point has yet to be considered.