The legislation applies to a company, and any other entity or partnership, that is liable to be wound up under the provisions of Part V of the Companies Act (2022 Revision). Its two main objectives are to separate restructuring from the winding-up regime; and to improve access to both the restructuring and winding-up regimes.
In preparing to commence the restructuring aspects of the Act, Companies Register staff have been briefed on the intent of the law; and trained on the upgraded IT system that will support the new regime.
The amendment originates from proposals made by the Financial Services Legislative Committee (FSLC), which proposes enhancements to the Cayman Islands financial services regime, for Government’s consideration and potential action. Established by Government, FSLC members are representatives from the local financial services industry; and persons appointed by Attorney General, and the Ministry of Financial Services and Commerce.
“I thank the FSLC for their acumen and agility in helping to keep our financial services products attractive and cutting edge. Sincere thanks as well to the full Ministry team, the Companies Registry, and the Insolvency Rules Committee for their diligent efforts and collaborative approach,” said the Minister for Financial Services and Commerce, the Hon. André Ebanks. “Together we continue to improve our financial services industry.”
Restructuring regime: Separation and access
Prior to the amendment, a company that wanted to restructure first needed to apply to the Court to wind up (in other words, liquidate) the company, which may have given the impression that the company was going out of business rather than restructuring. The winding-up application also could have triggered wind-up covenants in finance documents.
For companies that were considering using Cayman’s restructuring regime, this may have been a deterrent and undermined use of the regime. The Act addresses this issue by separating the restructuring regime from the winding-up regime.
The Act also improves access to the restructuring regime by no longer requiring a shareholder resolution, or an express power in the company’s articles of association, before company directors can apply for a restructuring.
Access to the winding-up regime
For all companies existing before the Act’s commencement, the Act equalises access to the winding-up regime by enabling all existing companies to add, in their articles of association, a provision that no longer requires a shareholder resolution or express power to allow company directors to apply for a winding-up.
For companies incorporated after the Act’s commencement, the Act improves access to the winding-up regime by no longer requiring a shareholder resolution, or an express power to be added in the company’s articles of association, before company directors can apply for a winding-up. However, a company still may choose to include these provisions in their articles of association, to govern the process that company directors are to follow for winding-up.
To support the Act, the Insolvency Rules Committee, chaired by the Chief Justice, the Hon. Anthony Smellie, QC, has prepared amendments to the Companies Winding Up Rules, 2018. These amendments, which do not need Parliamentary process, are intended to come into force simultaneously with the Act.
Parliament passed the Act on 8 December 2021. His Excellency the Governor gave his assent on 15 December 2021, and the Act was gazetted on 16 December 2021.