Orienteering Change: Navigating Restructuring Under The New Cayman Islands Regime

• Published date: 02 October 2023
• Subject Matter: Corporate/Commercial Law, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Corporate and Company Law, Insolvency/Bankruptcy
• Law Firm: Conyers
• Author: Mr Jordan McErlean

A version of this was first published in INSOL I-Read Student Newsletter, Issue 9, September 2023, and is republished with kind permission of INSOL International.

After a substantial industry consultation process, the Cayman Islands introduced the concept of Court-appointed restructuring officers into Part V of the Cayman Islands Companies Act (the "Companies Act") with effect from 31 August 2022.

The reforms sought to improve on the existing system for restructuring companies in financial difficulty and make the process more user-friendly by allowing a company to petition for the appointment of restructuring officers. This allows companies to take advantage of an automatic moratorium from the date of filing the petition which is similar to the US Chapter 11 stay or the English administration moratorium.

A general overview of the new restructuring regime can be found here.

Now that the new restructuring regime has had its one year anniversary, we take the opportunity to provide a brief update on how the regime is working in practice and to review the first case under it¹.

On 11 November 2022, Justice Kawaley ordered the first appointment of restructuring officers in Re Oriente Group Limited (FSD 231 of 2022), with reserved written reasons to follow.

On 8 December 2022, Justice Kawaley handed down his written judgment.

Effect of the Automatic Moratorium

A preliminary threshold matter was the statutory construction of section 91G of the Companies Act which provides for an automatic worldwide moratorium upon filing the petition for the appointment of restructuring officers, unless withdrawn or dismissed.

This is to be compared with the remedy of presenting a winding up petition and applying for the appointment of provisional liquidators for restructuring purposes under the previous regime, which provided for a stay from the date provisional liquidators were appointed and/or a winding up order was made under section 97(1) of the Companies Act.

The Court commented that the statutory stay on proceedings under Section 91G: "might be said to turbo charge the degree of protection filing a restructuring petition affords to the petitioning company..."

The parties disagreed whether the statutory scheme permits a restructuring officer petition to be presented after a creditor's winding up petition is filed.

The Court found that following the presentation of a winding up petition against a company there is no prohibition on a company presenting a petition seeking the...