Nature of Appointments
It should be noted that there are no specific Insolvency Laws in the Cayman Islands. Liquidation procedures are governed by the Companies Law (2007 Revision) in conjunction with the Winding-up Rules.
Compsulsory or Court Liquidations
A court liquidation or Compulsory liquidation as it sometimes known, is a method by which the Grand Court of the Cayman Islands directs the conduct of the liquidation.
There are several grounds under which a court should direct that a company should be wound-up;
On grounds of public intervention.
On application of the Cayman Islands Monetary Authority under statutory law.
Under section 94 of the Companies Law.
That the company has passed a special resolution requiring the company to be wound up, or;
The company has not commenced its business within a year, or;
The court is of the opinion that it is just and equitable that the company shall be wound up, or;
The company is unable to pay its debts.
A company shall be deemed to be unable to pay its debts if:
- a statutory demand greater than CI$ 100 remains unpaid for more than 21 days.
- the company is subject to an uncertified judgment execution.
- It is proved to the satisfaction of the Court that the company is unable to pay its debts. Any application of the Court for the winding up of a company shall be by petition which may be presented by the company, or by any one or more than one creditor or contributory of the company.
A winding-up of a company by the Court shall be deemed to commence at the presentation of the petition for winding up. The position of the liquidator is that he is an officer of the Court and is known as an Official Liquidator.
An Official Liquidator has, with the sanction of the Court, the underlying powers inter-alia:
- To bring or defend any action, suite, prosecution or other legal proceedings on behalf of the company.
- To carry on the business of the company, so far as may be necessary for the beneficial winding up thereof.
- To sell the property of the company.
- To do all acts and to execute all documents on behalf of the company.
- To do and execute all such other things as may be necessary for winding up the affairs of the company and distributing its assets.
This form of liquidation is principally creditor driven, allowing the Official Liquidator considerable powers of investigation into the company's affairs and is favorable where creditors are shareholders consider that the affairs of the company require detailed investigation. The earlier a financial crisis is identified the better the outcome. In the first instance contact us at cdj@cjacayman.com to arrange a free consultation.
^ top
Court Supervised Liquidations
Once a resolution has been passed by the shareholders to wind up a company voluntarily the Court may make an order directing the voluntary winding up should continue and be subject to such supervision of the Court and generally upon such terms and subject to such conditions that the Court thinks just.
A Voluntary Liquidator usually makes application to the Court supervision where fraud has occurred or litigates are likely to be enacted. From the moment of the approval of the Court supervision the liquidator becomes an Official Liquidator. A Court Supervision liquidation is dealt with by the Court as if it were a Compulsory Liquidation.
Provisional Liquidations
There are times when it desirable to appoint a Provisional Liquidator prior to the hearing but subsequent to the presentation for winding up a company. An application may be made ex-parte or inter-parte by either a creditor or a contributory.
Such applications are usually entertained by the Court when there is a degree of the dissipation of assets or in circumstances where fraud is suspected.
Voluntary Liquidations
A voluntary liquidation can be commenced by the shareholders whether the company is solvent or otherwise. The law does not distinguish between a solvent company and an insolvent company unlike the law in the United Kingdom and other countries. This situation will be remedied with the introduction of a new insolvency law in the not too distant future.
A voluntary liquidation can be used:
- by shareholders wishing to realize their capital.
- to close down a subsidiary that is no longer required.
- to ensure on orderly winding up of the company.
A voluntary liquidation is commenced by the passing of a resolution of the directors recommending such liquidation. Subsequently a shareholders extraordinary general meeting is held at which time a special resolution is passed to wind up the company and appoint a liquidator.
During this period of time the liquidator is under the direction of the shareholders although should the company be insolvent the liquidator must then regard the wishes of the creditors. In these circumstances he may wish to have the liquidation placed under the supervision of the Grand Court of the Cayman Islands. It should be further noted that in circumstances where the company is insolvent it would be unwise for a former director or officer to act as liquidator of the company
^ top
Receiverships
The power to appoint an Administrative Receiver is expressed in the debenture - a form of mortgage. His powers are set out in legislation but in the main include the power to take possession of the company's assets and realize those assets and carry on the company's business.
Cayman Islands Monetary Authority 'CIMA' - www.cimoney.com.ky
CIMA has far reaching powers under several laws should it be cognisant of any improper actions being conducted by licenced entities within its jurisdiction.
These include:
- the appointment of a [blank] under Sections [blank] of the Banks and Trade Companies Law (2003 Revision).
- the appointment of a [blank] under Section [blank] of the Companies Management Law (2003 Revision).
- the appointment of a [blank] under section [blank] of the Insurance Law (2003 Revision).
- the appointment of a [blank] under section [blank] of the Mutual Funds Law (2003 Revision).
- the appointment of a [blank] under section [blank] of the Proceeds of Criminal Conduct Law (2004 Revision).
- the appointment of a [blank] under section [blank] of the Securities Investment Business Law (2004 Revision).
|
