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Position of creditors
Forms of security
What are the main forms of security over moveable and immoveable property and how are they given legal effect?
The main forms of security include charges (including mortgages), liens and pledges.
Ranking of creditors
How are creditors’ claims ranked in insolvency proceedings?
Creditors’ claims are ranked in the following order:
- liquidation expenses, including liquidators’ fees and disbursements.
- preferential debts, which are:
- certain sums due to employees;
- certain taxes due to the Cayman Islands government; and
- for specific Cayman Islands banks, certain sums due to depositors.
- ordinary debts which are not otherwise secured and not subject to subordination or deferral agreements, save for claims for redemption proceeds following a redemption in law or purchase of shares by the company before the winding up;
- debts incurred by the company in respect of the redemption or purchase of its own shares, provided that the redemption or purchase took place before the liquidation commenced, as well as sums due to the holders of redeemable shares in the company whose shares were liable to be redeemed before the liquidation but were not due to the company’s default;
- ordinary debts that are subject to subordination or deferral agreements;
- in an official liquidation lasting more than six months, interest accruing on the company’s debts since commencement of the liquidation; and
- amounts due to preferred shareholders (under the company’s articles of association).
Any surplus remaining after payment of the above amounts is returned to the company’s shareholders in accordance with its articles or any shareholders’ agreement.
Can this ranking be amended in any way?
No, save for the contractual and deferral agreements referred to above.
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