A Supreme Court ruling that allowed the sale of US Holdings Ltd’s main asset before liquidation is being hailed by legal experts as a turning point in how Bermuda’s courts oversee high-stakes decisions made by insolvency professionals.

The controversial deal, worth about $2.04 million, transferred shares in Madagascar Oil Ltd and Madagascar Oil SA to BMK, the majority shareholder. The sum was only enough to cover liquidators’ fees and legal costs, leaving the company’s largest unsecured creditor, Outrider Master Fund LP, empty-handed.

Outrider had argued the sale was a transfer at an undervalue and claimed it violated existing loan guarantees. But Puisne Judge Shade Subair Williams found the court’s role was not to second-guess the commercial judgment of court-appointed insolvency experts unless their actions were irrational, in bad faith or so unreasonable no competent practitioner would do the same.

In a statement, Rhys Williams, director at Conyers, who represented the liquidators, said the ruling clarified how courts should approach “momentous” decisions by joint provisional liquidators.

“The court has confirmed that while it has a supervisory role, it will not substitute its own views for those of skilled insolvency practitioners who have acted reasonably and in good faith,” Mr Williams said.

The judgment also highlighted that insolvency law allows JPLs to disclaim burdensome contracts, even when that means overriding creditor objections, if it is the only viable path to preserving any value.

Particularly in circumstances where creditors claim oppression or undervaluation, the court was clear, said Mr Williams: absent clear evidence of misconduct, the expertise of appointed professionals will carry the day.