Mar 2024
On 11th March 2024, the Cayman Islands government issued the Companies (Amendment) Act, 2024 (“the amendment Act”). The amendment Act seeks to amend the Companies Act (2023 Revision) (“the principal Act”) to address various matters, including the streamlining of the share capital reduction process.
Reduction of share capital
Under the current provisions of the principal Act, a Cayman company seeking to reduce its share capital must obtain approval from its shareholders through a special resolution, followed by the Cayman court confirmation. This requirement has often resulted in a lengthy process spanning several months due to the involvement of the Cayman court.
The amendment Act introduces a new alternative method for share capital reduction in addition to the existing court-sanctioned procedure. A Cayman company may now reduce its share capital by a special resolution of members supported by a solvency statement from its directors. The solvency statement must be made no more than 30 days before the date of the special resolution for reducing share capital.
Under the amendment Act, “solvency statement” means a statement made in the prescribed form to the effect that a full enquiry into the company’s affairs has been made and to the best of the directors’ knowledge and belief the company will be able to pay its debts as they fall due in the ordinary course of business commencing on the date of the statement.
Such change, if brought into effect, will significantly simplify the procedures and, by doing away with the need for Cayman court sanction, shorten the time required to undertake a reduction of share capital for a Cayman company. In addition, it will bring the Cayman Islands into line with procedures in other jurisdictions commonly used for listing of Companies, such as Bermuda and the British Virgin Islands.
Commencement of the amendments to the principal Act
Currently, there is no precise commencement date (which will need to be issued to bring the amendment Act into force) in respect of the amendment Act. Based on past experience, we would expect commencement to be in late March or April 2024.
If you require any further information, please contact your usual Conyers contact person or Partner Richard Hall.