The Coming into Force Order of the Companies (Amendment) Act 2021 – legislation aimed at attracting and maintaining restructuring and liquidation business in the Cayman Islands – was published today in the Gazette of the Cayman Islands legislation. The law will come into force on August 31, 2022.
The legislation applies to a company, and any other entity or partnership which may be wound up under the provisions of Part V of the Companies Act (2022 Revision). Its two main objectives are to separate the restructuring from the liquidation regime; and improving access to restructuring and liquidation regimes.
In preparing to begin the restructuring aspects of the law, staff at the Registrar of Companies were made aware of the intent of the law; and trained on the upgraded computer system that will support the new regime.
The amendment stems from proposals made by the Financial Services Legislative Committee (FSLC), which proposes improvements to the Cayman Islands financial services regime, for government consideration and potential action. Established by the government, FSLC members are representatives of the local financial services industry; and persons appointed by the Attorney General and the Department of Financial Services and Commerce.
“I thank the FSLC for their insight and agility in helping to keep our financial services products attractive and cutting edge. insolvency for their diligent efforts and collaborative approach,” said Minister of Financial Services and Trade, the Hon. André Ebanks. “Together, we continue to improve our financial services industry.”
Restructuring regime: separation and access
Prior to the amendment, a company wishing to restructure had to first apply to the court to wind up (in other words, wind up) the company, which could make the company appear to be bankrupt rather than restructure. The liquidation request could also have triggered restrictive liquidation clauses in the financial documents.
For companies that were considering using the Cayman Restructuring Scheme, this may have been a deterrent and undermined the use of the scheme. The law solves this problem by separating the restructuring regime from the liquidation regime.
The law also improves access to the restructuring regime by no longer requiring a shareholder resolution, or express power of attorney in the company’s articles of association, before company directors can apply for a restructuring.
Access to the liquidation regime
For all companies existing before the entry into force of the law, the law equalizes access to the liquidation regime by allowing all existing companies to add, in their articles of association, a provision which no longer requires resolution of shareholders or express power to allow the directors to request a liquidation.
For companies incorporated after the law came into force, the law improves access to the liquidation regime by no longer requiring a shareholder resolution, or an express power of attorney to be added in the company’s articles of association. , before the directors of the company can apply for liquidation . However, a corporation can still choose to include these provisions in its articles of association, to govern the process that the directors of the corporation must follow for liquidation.
In support of the Act, the Insolvency Rules Committee, chaired by Chief Justice, Hon. Anthony Smellie, QC has prepared amendments to the Corporate Winding-up Rules 2018. These amendments, which do not require a parliamentary process, are intended to come into force at the same time as the Act.
Parliament passed the law on December 8, 2021. His Excellency the Governor gave his assent on December 15, 2021 and the law was published in the Official Gazette on December 16, 2021.