Knowledge

Cayman Islands company restructuring officer regime

22 October 2021

The Cayman Islands' Government gazetted the Companies (Amendment) Bill, 2021 (the "Bill") on 21 October 2021. The Bill introduces the facility to allow a company to restructure under the supervision of a Company Restructuring Officer ("CRO") and to provide for a stay on creditor action where a company is restructuring, for a connected purpose. The introduction of a CRO is a welcomed step to further enhance the Cayman Islands as an international restructuring jurisdiction.

Restructuring regime – the current landscape

The Cayman Islands' legislative framework does not currently contain reorganisation processes akin to those found in the UK and the USA, i.e. the administration regime or Chapter 11, respectively. Accordingly the Cayman Courts, which are well acquainted with some of the most complex cross border insolvencies and restructurings in the world, have adapted the provisions of the Companies Act to provide a mechanism for companies seeking to be restructured to be put into a provisional liquidation. This provides time for the directors, the provisional liquidator and the stakeholders to endeavour to restructure the Company whilst it has protection in the form of a moratorium on claims of unsecured creditors and an automatic stay of proceedings against the company.

While this manner of restructuring has been incredibly successful, the concept of seeking to put a company into liquidation, including filing a winding up petition with the Court, for the purposes of a reorganisation is often times alien to those unfamiliar with the Cayman process. Further, there is a certain unwelcomed stigma attached to a company being put into liquidation, albeit provisional, which could potentially impede or disrupt a smooth restructuring.

Proposed changes to the legislation

Long in the making, these changes have arisen as a result of formidable alliance between the private sector and the Cayman Islands Legislature – which is one of the reasons Cayman is able to continue to grow as one of the world's leading offshore financial centres.

Amongst other things, the Bill seeks to introduce the framework for a process whereby companies could restructure outside of the liquidation process, via the appointment (by the Court) of a CRO, on the grounds that the company is, or is likely to become, unable to pay its debts; and intends to present a compromise or arrangement to its creditors. Further, the proposed process is capable of being initiated by the directors of the company in way previously not possible, save for where they were explicitly authorised in the company's constitutional documents.

The CRO would be an officer of the Court in the same way as an official liquidator and would be required to meet similar professional qualification, insurance and independence requirements.

The introduction of the Bill is a welcomed step forward in the Cayman restructuring sphere which has the ability to encourage companies facing financial difficulty to work with its stakeholders to collaborate on the reorganisation and restructuring of the company with the aim of reviving the company's financial health, outside of the stigma of liquidation.

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