Mergers & Acquisitions 2023: Cayman Islands

• Published date: 03 April 2023
• Subject Matter: Corporate/Commercial Law, M&A/Private Equity, Directors and Officers, Shareholders
• Law Firm: Maples Group
• Author: Ms Suzanne Correy, Louise Cowley and Akshay Naidoo

1 Relevant Authorities and Legislation

1.1 What regulates M&A?

The primary sources of regulation of M&A in the Cayman Islands are the Companies Act (As Revised) of the Cayman Islands (the "Companies Act") and common law.

Part XVI of the Companies Act facilitates mergers and consolidations between one or more companies, provided that at least one constituent company is incorporated under the Companies Act. The Limited Liability Companies Act (As Revised) of the Cayman Islands (the "LLC Act") also provides for a similar framework for Cayman Islands limited liability companies.

In addition:

• mergers, amalgamations and reconstructions by way of a scheme of arrangement approved by the requisite majorities of shareholders and creditors and by an order of the Cayman Islands court under section 86 or 87 of the Companies Act are still available for complex mergers (and are mirrored in the LLC Act); and
• section 88 of the Companies Act provides a limited minority squeeze-out procedure (and, again, is mirrored in the LLC Act).

The Cayman Islands does not have a prescriptive set of legal principles specifically relevant to "going private" and other acquisition transactions (unlike other jurisdictions such as, for example, Delaware). Rather, broad common law and fiduciary principles will apply.

While there are no specific statutes or government regulation concerning the conduct of M&A transactions, where the target company's securities are listed on the Cayman Islands Stock Exchange ("CSX"), the CSX Code on Takeovers and Mergers and Rules Governing Substantial Acquisitions of Shares (the "Code"), which exists principally to ensure fair and equal treatment of all shareholders, may apply.

1.2 Are there different rules for different types of company?

Except to the extent described above with respect to companies listed on the CSX, there are no different rules for different types of company.

1.3 Are there special rules for foreign buyers?

There are no foreign investment restrictions or exchange control legislation in the Cayman Islands. However, any company with an established physical presence in the Cayman Islands must be structured so as to comply with local licensing laws, including with respect to ownership. Any company engaging in business locally is required to be licensed under the Trade and Business Licensing Act (As Revised) of the Cayman Islands and the applicant must either be beneficially owned and controlled at least 60% by persons of Caymanian Status, or hold a licence under the Local Companies (Control) Act (As Revised) of the Cayman Islands. However, foreign investment, if considered beneficial to the Cayman Islands' economy, is generally encouraged.

1.4 Are there any special sector-related rules?

There are change-of-control rules applicable to entities regulated by the Cayman Islands Monetary Authority under the Banks and Trust Companies Act (As Revised) of the Cayman Islands, the Insurance Act (As Revised) of the Cayman Islands or (with respect to licensed mutual fund...