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Cayman Islands Restructuring – Recent Cases

June 2019 Nigel K. Meeson QC

Restructuring of insolvent companies in the Cayman Islands is implemented by a flexible regime comprising the appointment of provisional liquidators coupled with an adjournment of the winding-up petition. This enables a restructuring to be pursued, typically through a scheme of arrangement and the dismissal of the winding-up petition. However, recent cases show that the Court will not do so without a sound basis.

The Court has gone so far as to adjourn a winding up petition to enable a restructuring to be pursued even without the protection of provisional liquidators. Segal J was prepared to do so in Grand TG Gold Holdings Limited (unreported, 22 August 2016), but this is exceptional. More recent cases have taken a more conventional approach.

In CW Group Holdings Limited (unreported, 3 August 2018) Parker J was faced with two competing applications to appoint provisional liquidators: one filed by the company for the purposes of pursuing a restructuring and another filed by a significant bank creditor, supported by other bank creditors, for the purposes of protecting the assets of the company against alleged mismanagement. He resolved the matter by considering whether it was “necessary” to appoint provisional liquidators for the purposes of preventing the dissipation or misuse of assets and mismanagement or misconduct by the directors which was the statutory test which the creditor had to satisfy in order for the Court to make an appointment under Section 104(2)(b) of the Companies Law. He held on the evidence that the creditor had not satisfied this heavy burden which required clear or strong evidence to be presented to the Court.

 

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