Introduction of the new Cayman Islands Restructuring Agent Regime – Insolvency/Bankruptcy
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-The long-awaited and welcome reforms to the Cayman Islands Restructuring and Insolvency Laws will come into force on
August 31, 2022.
These significant amendments to Part V of the Cayman Islands Companies Act (“Companies Act“) will introduce a new restructuring agent scheme available to companies in financial difficulty, which will be accessible without the need to petition for liquidation in the Cayman Islands Grand Court (the “Cayman Court“). Upon filing the application for the appointment of restructuring agents, companies will be able to obtain an immediate, stand-alone restructuring moratorium on action by unsecured creditors that will have extraterritorial effect (under Cayman Islands law ), under which restructuring can be proposed and implemented.
The main features of the new restructuring regime will be the following:
- Businesses may petition the Cayman Court for the appointment of a restructuring agent on the grounds that: (i) the business is or is likely to become unable to pay its debts; and (ii) intends to present a Compromise or Arrangement to its creditors (or classes thereof) either, in accordance with the Companies Act (for example through a Cayman Islands Arrangement), a law foreign or through consensual restructuring.
- The petition requesting the appointment of a Restructuring Officer may be presented by the directors of a company: (i) without a shareholder resolution and/or express power to petition in its articles of association; and (ii) without the need to file a liquidation petition as a condition precedent.
- A stand-alone restructuring moratorium on the action of unsecured creditors will automatically arise upon the filing of the application for the appointment of restructuring agents, which will have extraterritorial effect, in accordance with Cayman Islands law (previously the moratorium only took effect to the appointment of provisional liquidators rather than filing the request).
- The Cayman Islands Schemes of Arrangement can now potentially compromise debt governed by English law, thus broadening the scope of the Cayman Islands Restructuring Regime to more debt restructuring situations.
- Secured creditors with a security interest in some or all of the Company’s assets will remain entitled to enforce their security interest without permission from the Cayman Court and without reference to a restructuring agent.
Another significant legislative reform is the removal of the “majority in number” or “count” test for shareholder arrangements, so that only the “majority in value” test need be met to approve a shareholder arrangement. shareholders proposed to the meeting(s).
Further details on the new restructuring agent regime and other changes to the Companies Act can be found here:
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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