The statutory demand process is widely used by creditors seeking to secure payment of their debts. This article discusses the options for bringing or challenging a statutory demand under Cayman Islands law.
When creditors are owed CI$100 or more by a Cayman Islands company and have attempted to collect their money without success, they may resort to sending a statutory demand for payment. This does not require the Court’s involvement and is often used as a leverage tool by creditors in an effort to collect their debt quickly. It operates as a form of caution that if a creditor is not paid within 21 days of the date upon which it is served on the company, the company will be deemed to be unable to pay its debts and a winding up petition may be presented against it in accordance with sections 92(d) and 93(a) of the Companies Law (2020 Revision) (as amended).
If a creditor is confident as to the validity of its debt1, a statutory demand can be a cost effective and useful method to obtain prompt payment, or to invite settlement proposals, given the consequences that follow if the statutory demand is left unsatisfied.
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Statutory Demands in the Cayman Islands
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1 If the debt is governed by a foreign law, it may be prudent to take both Cayman Islands and foreign legal advice on the validity of the debt. If the creditor is aware that the debt is disputed prior to service of the statutory demand, it may be penalised in costs in the event that the statutory demand is met with an injunction application: see Re A Company [1996] 1 WLR 491. See also Aramid Entertainment Fund Ltd v KBC Investments V Limited [2014] 1 CILR 455, Cayman Islands Court of Appeal.