Consolidated and amended insolvency and restructuring rules and regulations come into force in the Cayman Islands on 1 February 2018 (the "Amended Rules").
The Amended Rules do not represent a comprehensive overhaul of the rules and regulations but they do make a number of significant changes to the procedural aspects of Cayman Islands domestic and cross-border insolvency and restructuring legislation. These changes largely reflect and codify existing practice.
Companies Winding Up Rules
Non-compliance with the rules
The court is given wide discretionary powers to deal, as it sees fit, with a failure to comply with the Companies Winding Up Rules ("CWR"). Previously the courts had limited powers to address non-compliance short of dismissal. The new rules give the courts more flexibility and thereby take a practical and balanced view on non-compliance. Compliance with the CWR remains crucial but the risk of harsher consequences for minor slips is alleviated.
Company winding up applications
There are now comprehensive rules governing the procedure for companies to apply for their own winding up. While such applications are less frequent than creditors' or shareholders' petitions (because a company may not apply for its own winding up without the express authority in its articles of association or a shareholders' resolution) these new rules provide welcome codification of existing practice.
Codification of the effect of a winding up order
The CWR specify that, where a winding up order is made or a voluntary liquidation is brought under the supervision of the court, the directors' powers cease. While this is simply a codification of existing Cayman Islands law, the express statutory language provides clarity.
Publication of notices - greater flexibility
The court can dispense with the requirement on liquidators to publish notices in newspapers if the expense is disproportionate and/or would be unlikely to serve any useful purpose. The court may therefore allow liquidators to publish notices through more effective and less expensive means, such as companies' websites, or even, in appropriate circumstances, dispense with the publication requirement completely.
Cross-border insolvency - assistance to foreign officeholders and notice of foreign insolvency proceedings
The legislation already provides a simple and inexpensive method to recognise the appointment of a foreign officeholder appointed in respect of an insolvency or restructuring proceeding commenced in the jurisdiction of the foreign debtor's place of incorporation. Upon recognition certain assistance from the Cayman Islands courts is available, for example, obtaining an order staying or preventing the commencement of legal proceedings. Further, where a Cayman Islands company or a foreign incorporated company registered in the Cayman Islands is subject to foreign insolvency or restructuring proceedings, notice must be provided to the Cayman Islands Registrar of Companies and be published in the Cayman Islands Gazette.
The Foreign Bankruptcy Proceedings (International Cooperation) Rules, which set out the relevant procedures, have been amended to provide greater clarity on such applications, notices and publications.