The Cayman Islands Companies (Amendment) Act, 2024 will come into force on 1 January 2026, making welcome amendments to the Companies Act (as revised) (the "Act").
The key amendments are:
- to vary the procedure for reduction of share capital;
- to provide for the redemption of fractional shares;
to extend the nature of foreign companies that may apply to be registered by way of continuation; - to provide for the re-registration of an exempted company as an ordinary resident company; and
- to provide for the conversion of a limited liability company or a foundation company to an exempted company.
Procedure for reduction of share capital
The present position is that, subject to section 37 of the Act (in relation to the redemption and purchase of shares) and to confirmation by the Grand Court, a company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles, by special resolution reduce its share capital. That procedure is being supplemented by an alternative procedure that does not require the confirmation of the Grand Court.
With effect from 1 January 2026, a reduction of share capital may be achieved by special resolution supported by a solvency statement. A reduction of capital is supported by a solvency statement if the directors of the company make a solvency statement no more than 30 days before the date on which the special resolution for reducing share capital was passed. Any director who knowingly makes a solvency statement without having reasonable grounds to believe that the company will be able to pay its debts in full as they fall due in the ordinary course of business commits an offence.
Where a reduction of capital is supported by a solvency statement (rather than with the confirmation of the Grand Court), the company shall, within 15 days after the special resolution for reducing share capital is passed, deliver to the Registrar:
- a copy of the solvency statement; and
- a minute showing, in respect of the company, the following information:
- the amount of share capital of the company;
- the number of shares into which the share capital is to be divided and the amount of each share; and
- the amount, if any, deemed to be paid up on each share.
The Registrar, on receipt of the copy of the solvency statement and the minute, shall:
- register the solvency statement and the minute, and issue a certificate stating that the solvency statement and the minute have been registered; and
- publish by notice in the Gazette the registration of the solvency statement and the minute.
The minute, when registered, shall be deemed to be substituted for the corresponding part of the memorandum of association and shall be valid and alterable as if it had been contained in the memorandum of association.
Redemption of fractional shares
Provisions authorising a company to issue shares which are to be redeemed or liable to be redeemed at the option of the company or the shareholder are amended to expressly permit the issue of fractions of shares that are to be redeemed or liable to be redeemed.
Continuation
The present position is that a body corporate incorporated, registered or existing under the laws of a jurisdiction outside the Cayman Islands may only apply to the Registrar of Companies to be registered by way of continuation if it is incorporated, registered or existing with limited liability and a share capital. This requirement is being amended to allow for a foreign company to apply to be registered by way of continuation if it is incorporated, registered or existing with limited liability, regardless of whether it has a share capital.
Exempted company may be re-registered as an ordinary resident company
An exempted company may re-register as an ordinary resident company if:
- the company passes a special resolution that:
- it should be so re-registered;
- makes alterations in the company's memorandum of association as are necessary to bring it in substance and in form into conformity with the requirements of the Act with respect to the memorandum of association of an ordinary resident company;
- makes alterations in the company's articles of association as are requisite in the circumstances; and, if necessary,
- changes the company's name; and
- an application for re-registration, signed by a director, is delivered to the Registrar of Companies together with:
- a copy of the memorandum and articles, as altered by the special resolution; and
- a re-registration fee equal to the fee payable on the registration of an ordinary resident company (which fee varies depending on the company's registered capital)
If the Registrar is satisfied that an exempted company may be re-registered as an ordinary resident company, the Registrar shall:
- retain the application and other documents delivered by the company; and
- issue to the company a certificate of re-registration stating that the company has been re-registered as an ordinary resident company.
Upon the issue of a certificate of re-registration:
- the company becomes an ordinary resident company; and
- any alterations in the memorandum and articles set out in the special resolution take effect accordingly.
Any tax undertaking given to the company pursuant to the Tax Concessions Act (as revised) shall not apply from the date of the re-registration.
The issue of a certificate of re-registration shall not operate:
- to create a new legal entity;
- to prejudice or affect the identity or continuity of the company;
to affect the property of the company; - to affect any appointment made, resolution passed or any other act or thing done in relation to the company pursuant to a power conferred by the memorandum and the articles of association of the company or by Cayman Islands law;
- to affect the rights, powers, authorities, functions and liabilities or obligations of the company or any other person; or
- to render defective any legal proceedings by or against the company.
Any legal proceedings that could have been continued or commenced by or against the company before its re-registration may, notwithstanding the re-registration, be continued or commenced by or against the company after re-registration.
Conversion of a limited liability company to an exempted company
A limited liability company (an "LLC") may be re-registered as an exempted company.
The conditions to, and procedure for, such re-registration are broadly similar to those described above in relation to the re-registration of an exempted company as an ordinary resident company, save that:
- the application shall also be accompanied by a certificate of good standing;
- rather than approving the re-registration by special resolution, an LLC shall approve the re-registration in the following manner:
- the LLC resolves to be so re-registered upon the affirmative vote or written consent of at least two-thirds of its members; or
- the re-registration is expressly permitted in its LLC agreement to provide an alternative vote, written consent or any other form of authorisation for the conversion as may be provided for in the LLC agreement (the "Conversion Consent"); and
- the Conversion Consent shall adopt a registration declaration and memorandum and articles of association in conformity with the Act.
The re-registration fee is equal to the annual fee payable by an exempted company (which fee varies depending on the company's registered capital).
Further, the effect of a re-registration of an LLC as an exempted company is similar to the effect of a re-registration of an exempted company as an ordinary resident company (as described above), save that:
- the LLC shall cease to be registered as an LLC (and the register of limited liability companies shall be updated accordingly);
- the LLC agreement of the LLC shall cease to have effect;
- the members of the conversion applicant shall be deemed shareholders of the exempted company and shall receive shares with a nominal or par value, at a discount or at a premium as is provided in the resolution, alternative vote, written consent or other form of authorisation; and
- any tax undertaking given to the LLC shall not apply from the date of the re-registration (although the exempted company may apply for a fresh undertaking pursuant to the Tax Concessions Act (as revised).
Conversion of a foundation company to an exempted company
A foundation may be re-registered as an exempted company.
The conditions to, and procedure for, such re-registration are broadly similar to those described above in relation to the re-registration of an exempted company as an ordinary resident company, save that:
- the application shall also be accompanied by a certificate of good standing; and
- the special resolution shall adopt a registration declaration and memorandum and articles of association in conformity with the Act.
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