As of March 1, 2009, the laws of the Cayman Islands dealing with
corporate insolvency were updated by the implementation of
amendments to the Cayman Islands Companies Law that were originally
enacted in 2007 but lay dormant pending the promulgation of three
new sets of procedural rules governing the conduct of insolvency
matters and an amendment to the rules of the Cayman Islands Grand
The new rules are the Companies Winding-Up Rules 2008, the
Insolvency Practitioners' Regulations 2008, the Foreign
Bankruptcy Proceedings (International Cooperation) Rules 2008, and
the Grand Court (Amendment No. 2 Rules) 2008. Previously,
insolvency procedures in the Cayman Islands have generally been
regarded as haphazard and unsatisfactory.
The new rules and regulations, together with the replacement of
Part V of the Companies Law (which deals with insolvency generally)
and the introduction of Part XVI (which deals with international
cooperation), represent a major milestone in the evolution of the
Cayman Islands' legislative framework by providing the Caymans
with a modernized and well-considered insolvency regime
specifically tailored to address the needs of those who use the
Cayman Islands as a major financial center.
Supplanting the U.K.'s Insolvency Rules 1986, the Companies
Winding-Up Rules 2008 are the first procedural rules for insolvency
matters specifically adopted for the Cayman Islands. The new rules
apply to all insolvency proceedings commenced after March 1, 2009,
as well as actions taken in proceedings pending as of that date.
The insolvency law now focuses on the rights of creditors of all
priorities. There are no formal "corporate rescue" or
reorganization provisions similar to chapter 11 of the U.S.
Bankruptcy Code or administration in the U.K. Secured creditors
retain their rights to enforce their security outside the
liquidation process. In addition, contractual setoff and netting
provisions will remain enforceable against the liquidators of
insolvent Cayman Islands companies. The new provisions also
reaffirm the enforceability of multilateral setoff
Among the provisions in the new rules is the express duty of
official liquidators of Cayman Islands companies that are the
subject of parallel insolvency proceedings in another jurisdiction,
or whose assets overseas are subject to foreign bankruptcy or
receivership proceedings, to consider whether it is advisable to
enter into an international protocol for the purpose of
coordinating the cross-border proceedings. Other provisions include
the elimination of strict deadlines for the payment of
distributions to creditors after expiration of the claim submission
deadline and the implementation of a specific regime to govern the
treatment of unclaimed dividends.
Under the Insolvency Practitioners' Regulations 2008,
insolvency practitioners in the Cayman Islands will for the first
time be required to meet defined criteria for appointment as
official liquidators, including licensing, minimum experience,
residency, conflict-of-interest, and insurance requirements (with
certain grandfathering exceptions). New rules regarding
remuneration of official liquidators are also covered by the
The Foreign Bankruptcy Proceedings (International Cooperation)
Rules 2008 regulate applications made under the new Part XVI of the
Companies Law, which: (i) delineates the procedure to be followed
in connection with an application by a foreign representative for a
declaration that he or she is entitled to act on behalf of a
debtor; (ii) establishes procedures governing applications for
ancillary orders such as injunctions, orders for stay of
enforcement, or examination or surrender of assets; and (iii)
obligates any Cayman Islands company and any foreign company
registered in the Cayman Islands that becomes the subject of
foreign bankruptcy proceedings to give notice of that fact to the
Registrar and advertise it in the Cayman IslandsGazette.
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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