Cayman Islands statutory
mergers increased from 44 in 2010 to 113 in 2014, and show no signs
of any slowdown. What is behind this growth? The simple
answer is "opportunity". The myriad of benefits for using
a Cayman Islands company remain true, but added to the arsenal is
possibly the most efficient and effective corporate acquisition
regime currently available to international parties.
So why exactly is it so attractive?
Here are our thoughts:
The Cayman Islands statutory merger
regime uses familiar terminology and has been embraced by US
parties. Such is the level of acceptance that it is now common for
private equity funds to use Cayman Islands holding companies in
order to take advantage of the Cayman Islands merger regime at the
time of the exit.
A director of a Cayman Islands
company is subject to robust but generally straightforward
fiduciary duties. Such duties are owed to the company itself and
not its shareholders. A director must act in the best
interests of the company thereby allowing a more flexible approach
as compared with being obligated to maximize shareholder
value. Termination fees, "no shop" and
"matching rights" provisions for deal certainty are
common and there is no reason why these are not valid under Cayman
Islands law if they are in the best interests of the company.
A special shareholder resolution
(being a resolution of at least two thirds of the voting shares of
the target present in person or by proxy at the general meeting) is
generally required for a Cayman Islands merger. This is lower than
many other jurisdictions.
This is required in addition to
shareholder consent, and so it is not possible to negotiate
"force the vote" as in some other jurisdictions where the
merger can be submitted for a shareholder vote without a favourable
Cayman Islands lawyers do not
generally accept instructions on a contingency fee basis generally
and rarely would Cayman Islands court award penal damages - two
factors that tend to keep litigation risk lower than other
jurisdictions. There are only two instances of mergers being
challenged in the Cayman Islands courts by dissenting
Shareholders wishing to dissent can
do so and claim the fair value for their shares. Absent extreme
cases, dissenting shareholders cannot delay or stop a duly approved
Given the familiarity and flexibility
of the Cayman Islands statutory merge regime, we expect it will
continue to feature strongly in international merger and
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.
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Confidentiality of corporate documents and information is one of
the key attractions of incorporating a company in the BVI. A
company search of the BVI Registrar of Corporate Affairs will only
disclose certain information and documents.
When pursuing a debt, it is common to add a claim for interest on the monies due.
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