The voluntary liquidation process in the Cayman Islands is straight forward and definitive as a Cayman Islands company that has underwent a voluntary liquidation ceases any future claims by creditors against the company. It should be noted that the voluntary liquidation process in the Cayman Islands is a statutory process with strict deadlines for filings and publication requirements which if not adhered to correctly can result in potential large fines. Therefore you should select a professional liquidator who fully appreciates their obligations.
Dissolution of a Company – Step Plan
It should be determined (by the Directors) whether the company is in fact suitable for a voluntary liquidation.
1. Determine if the Company is suitable
Step 1 – The directors of the company should satisfy themselves that the Company is suitable for a voluntary liquidation and the main criteria for this is whether the company is solvent. The solvency test in the Cayman Islands is whether the company can pay its debts in full together with interest (at the government rate) for a period of not more than twelve months. Even if the company cannot itself pay the debts if it is receiving support from another entity then the directors may be able to satisfy themselves of this.
2. Declarations of Solvency signed
Step 2 – All the directors sign Declarations of Solvency and we recommend a board meeting is held documenting the grounds upon which they have satisfied themselves of the solvency as the directors must have reasonable grounds for doing so or they can face fines / imprisonment.
3. Shareholder Special Resolution passed
Step 3 – Only following Step 2, the shareholder(s) pass a Special Resolution which must:
(3.1) resolve to wind up the company;
(3.2) appoint voluntary liquidator (s);
(3.3) approve the liquidators fee; and
(3.4) provide for an indemnity to the liquidators.
Following the passing of this shareholder resolution the company is formally in-liquidation and the directors powers cease.
The company being liquidated must have a remaining shareholder. In some cases the company may have voting and non-voting shareholders and depending on the terms of the company's Articles of Association, the voting shareholder can often pass the required Special Resolution. If there is no shareholder the MG can hold the shares in some circumstances for the purposes of the liquidation.
4. Notice and Liquidators consent
Step 4 – The Liquidator(s) must sign a consent form agreeing to be the liquidator which is filed with the Registrar of Companies together with a notice that the shareholders have resolved to liquidate the Company.
5. Publish the First Gazette Notice
Step 5 – The first notice is submitted in the Cayman Islands Gazette advertising the fact that the company has been placed in voluntary liquidation and the contact details of the liquidator is provided for any creditor claims
6. Publication of Notice in other jurisdictions
Step 6 – In some cases it will be necessary to advertise the fact that the company has been placed in voluntary liquidation in jurisdictions in addition to the Cayman Islands. The typical situations will be where the company traded in an oversees jurisdiction and not all creditors are known.
7. Publish the Second Gazette Notice
Step 7 – A second notice is submitted in the Cayman Islands Gazette advertising for all creditors to submit a proof of claim to the liquidators by a certain date which should at least give 21 days from the date of publication. This date does not bar future claims by creditors. This notice also gives the date of the final meeting.
8. Pay any creditor claims
Step 8 – If there are any claims from creditors these will be paid by the liquidators as the company is solvent and able to pay its debts as they fall due. If claims are received after the date provided by the second notice (Step 7.) the liquidators can determine if they pay the claim or not.
9. Pay final dividend
Step 9 – The liquidators prepare an account of the liquidation from Day 1 (Step 3) to the date of the final meeting advertised in the Second Gazette (Step 7).
10. Final Meeting held and notice to Registrar
Step 10 – A final shareholder meeting is held liquidators final accounts are approved by the shareholders (who can attend via proxy). The notice has to be filed with the Registrar of Companies within 7 days of the final meeting.
NOTE: To get the company to Stage 10 from Day 1 (Step 3) can take as little as 5 weeks where there are no assets nor creditors remaining as both Gazette notices (Steps 5 & 7) can be published in the same Gazette thereby saving time and fixing the date of the final meeting (step 10). However where the position regarding creditors is not clear then it is prudent to wait for responses before proceed to publish the second notice (Step 7) and this will therefore take at least 10 weeks as the Gazette is publish every two weeks.
90 days from Step 10
A Strike Off is an alternative to a voluntary liquidation and consists or the perpetration of a Directors Affidavit and a request to the Registrar of Companies to strike the company. However, this is only suitable for companies that have never actually traded or have not traded for a long period of time as any shareholder or creditor can request for a period of two years (longer in some cases)can apply to have the company restored.
We would be delighted to share our experience with as our professionals have acted as liquidator for many hundreds of voluntary liquidations, so we can use our experience to ensure that the dissolution of your Cayman Islands company goes smoothly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.