Law And Practice Cayman Islands

• Published date: 11 December 2020
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Corporate and Company Law, Insolvency/Bankruptcy, Shareholders
• Law Firm: Campbells
• Author: Mr Guy Cowan and Guy Manning

1. Market Trends and Developments

1.1 The State of the Restructuring Market

In 2019, a total of six restructuring petitions were filed in the Grand Court of the Cayman Islands. Of these, three related to share capital reductions and two related to schemes of arrangement. In addition, one petition related to both a share capital reduction and a scheme of arrangement. This compares to a total of nine restructuring petitions filed in 2018 and 17 restructuring petitions filed in 2017, which demonstrates a significant slow-down in financial restructurings over that period.

In addition, 33 insolvency petitions were filed in 2019, of which 24 sought winding-up orders and the other nine sought orders bringing voluntary liquidations under the supervision of the court. This compares to a total of 56 insolvency petitions filed in 2018.

The impact of COVID-19 on the restructuring market in Cayman has yet to be seen and is something that will probably only become apparent over the course of the next 12-18 months. However, in one recent case (re Obelisk Capital Management Limited -unreported), a petitioner presented a winding-up petition on the basis of an unpaid statutory demand presented in February 2020. The company argued that the restrictions on its business implemented as a result of COVID-19 represented an exceptional circumstance which justified its inability to pay the statutory demand. However, the Petitioner was able to show that the relevant restrictions post-dated the date on which payment was in fact due and, accordingly, the court determined that it was appropriate to make a winding-up order.

2. Statutory Regimes Governing Restructurings, Reorganisations, Insolvencies and Liquidations

2.1 Overview of Laws and Statutory Regimes

Corporate insolvency in the Cayman Islands is governed by Part V of the Companies Law (2020 Revision) (the Companies Law) and the Companies Winding Up Rules, 2018 (the CWR). Those provisions apply both to the winding up of companies - including certain foreign companies - as defined by the Companies Law and, pursuant to Section 36 of the Exempted Limited Partnership Law (2018 revision), to the winding up of exempted limited partnerships in the Cayman Islands.

The doctrine of judicial precedent applies in the Cayman Islands, so case law is also relevant and important. Cayman Islands case law is developing but remains comparatively small in scope. Where there is no applicable Cayman Islands case law, the Cayman courts will look to...