Cayman Islands: Cayman Islands Perspective On Shareholder Activism

An activist shareholder will typically identify an under-performing company or a company with other potential for increased shareholder value and then seek to bring about change, typically operational or strategic change, by putting pressure on the company's Board. This can be a very rewarding investment strategy.

Different types of investors will have different time horizons for change and exit strategies. Some hedge funds may be looking to secure short-term gains and exit. BlackRock, on the other hand, in their letter to CEOs, encourage companies to take a long-term approach to creating value1.

Other investors, such as CalPERS, the US public pension fund, may seek the adoption of what it views as corporate governance best practices among investee companies, such as diversity, independence, social and environmental responsibility and disclosure.

In the context of a Cayman Islands company2, it is vital that those who are considering the acquisition of a minority stake in a Cayman Islands company ("CayCo") consider the provisions of the company's constitutional documents, especially its articles of association ("Articles") to assess the scope for forcing change should diplomatic efforts not succeed in bringing about the desired results.

Getting a copy of the Articles

The memorandum of association and Articles of a CayCo are not publicly available from the Cayman Islands Companies Registry (the "Registry"), so a copy of the documents (and confirmation that they are the current registered versions) must come from the company itself. Where the company's shares are traded on a recognised stock exchange, the rules of the exchange will often require the constitutional documents to be available on the company's and/or the exchange's website.

Where a shareholder of a CayCo whose shares are unlisted finds itself without a copy of the constitutional documents, the Companies Law (the "Law") provides that a copy of the documents shall be forwarded to a member at its request, although the CayCo may charge a sum not exceeding one dollar for each copy.

Accessing other Information

Shareholder information rights with regard to the affairs of a CayCo are a matter for the Articles. A shareholder in a CayCo has no inherent or statutory right to receive information relating to the company's affairs3. Hence, financial statements are not otherwise available publicly or to shareholders unless the Articles so provide or the company's shares are listed on a stock exchange and the financial statements are available through the exchange.

Scope for Bringing about Change

The armoury of a minority shareholder to instigate change within a CayCo is limited, absent specific rights in the Articles, in the terms of issue of the shares held or in contractual rights in a shareholders agreement. Beyond sending letters to the Board (open or otherwise), tactics considered often include:

Requisitioning a Shareholder Meeting: A common tactic used by activist shareholders is to submit a requisition to the company which requisition calls on the directors to convene a general meeting of members to consider proposals suggested by the shareholder or to have a resolution added to the agenda of a forthcoming meeting. There is no statutory right in the Law which requires a company to act on such a request. Articles will often provide shareholder rights in that regard4, but the thresholds may vary from company to company, so the requirements of the CayCo concerned need to be checked to ensure that the rights exist and that the thresholds are suitable in the context of the company concerned.

Board Positions: Although directors of a CayCo owe their statutory and fiduciary duties to the CayCo as a whole (and not to a specific appointing shareholder) the appointment or proposal for appointment, of one or more directors to the Board of a CayCo is a key method by which shareholders can bring pressure for strategic change.

The Law contains no provisions regulating the appointment or removal of directors. Accordingly, the Articles must be examined to ascertain the method by which and the term for which directors may be appointed and/or how directors may be removed from office. Absent the scope for a requisition (see above) the avenues for seeking to have the election or removal of one or more directors put to shareholders at a general meeting may be limited.

Unless the Articles so provide, there is no requirement for any or all of the directors to be elected or re-elected at general meetings, nor is there a statutory requirement for a CayCo to hold an annual general meeting, although more widely held companies commonly do so.

Shareholder Claims

Derivative action: As noted above, directors generally owe their duties to the company rather than to individual shareholders and thus the company is normally considered to be the proper claimant to bring a claim in respect of a loss suffered by the company arising from a breach of directors' duties. However, in some circumstances, the Court will permit a shareholder to bring a claim on behalf of the company in respect of a wrong done to the company (a so-called derivative claim). The most common exception to the general rule (that the company is the proper claimant) is where there has been a "fraud on the minority" and the alleged wrong-doers are in control of the company.

If a corporate action is proposed which a shareholder believes will be in breach of the directors' fiduciary duties owed to the company (such as, for example, a sale of a key asset at a significant discount to its fair value), a shareholder could petition the Cayman Islands Court for an injunction to restrain the action. However, the Court can be expected to regard the directors as being best placed to conduct the management of the company's affairs and will need to be persuaded that something untoward is going on. The Court will also apply a "balance of convenience" test in determining whether an injunction should be grated, weighing up the disadvantage to the shareholder(s) if the order is not made against the disadvantage to the company if it is. [The Court may also require cross-undertakings as to damages to be given by the claimant to cover claims that an injunction so granted is ultimately determined not to have been justified.]

Representative Action: A shareholder of a CayCo may bring an action before the Court on his own behalf and on behalf of other shareholders where the claimant is seeking to enforce a right or interest which is common to the shareholders.

Inspector: In extreme circumstances, an aggrieved shareholder may consider making an application to the Court under Section 64 of the Law, pursuant to which the Court may appoint an inspector to examine the affairs of a CayCo and report to the Court. In the case of a CayCo whose capital comprises shares and which is not a banking company, one or more shareholders holding not less than one-fifth of the shares in issue may apply for such an appointment.

Winding Up: An aggrieved shareholder may, usually as a last resort, apply to the Court for an order that the company be wound up on the ground that it is just and equitable to do so5. Once such a petition has been presented, the directors would need the consent of the Court before they could proceed with a sale of the company's assets. Clearly, a petitioning shareholder would need to be of the view that a liquidation would realise greater value for shareholders than would the continued business of the company. Although there is no limit to the circumstances in which the Court may consider it appropriate to make an order, given the seriousness of the remedy, an order will not be made lightly. Examples of when such an order has been made include: (i) when the "substratum" of the company is gone (essentially its intended purpose is no longer possible) and (ii) the company's Board cannot function, perhaps due to dead-lock.

The scope for bringing about change within a Cayman Islands company is therefore limited, absent a controlling stake, unless care has been taken to build minority rights into the constitutional documents of the company or contractually at the subscription stage.


1  April 2015 letter from Larry Fink, Chief Executive Officer of BlackRock to S&P 500 CEOs in the US and to the largest companies in EMEA and APAC in which BlackRock invests.

2  This paper addresses only Cayman exempted companies, which is the most common form of company for international business.

3  The Cayman Court may, at its discretion, make an order for pre-action discovery in appropriate cases, which could assist in this regard (perhaps in a derivative action (see below)), but such would be unlikely to be available in support of a nonspecific "fishing expedition".

4  Where no articles are adopted by a company limited by shares (or to the extent that such are not dis-applied by Articles that are adopted) the regulations set out in Table A of the Law apply. Table A regulations give no right for shareholders to requisition a general meeting nor any right for shareholders to require a resolution or business to be added to the agenda of a general meeting.

5  Although there is no facility in Cayman Islands law for a shareholder to bring an action based on the English law concept of unfairly prejudicial conduct, the range of remedies available to the Cayman Court in a just and equitable winding up application is similar to those available to an English Court in such an action (eg to regulate the company's affairs, to order or prevent an action, to order a share purchase by the company or other member(s)).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions