Bermuda: Appleby Merges The First Registered Mutual Fund Structure In The Cayman Islands
Last Updated: 15 September 2009

According to the Cayman Islands Monetary Authority ("CIMA"), Appleby is the first law firm in the Cayman Islands to utilise the "merger provisions" for two CIMA registered mutual funds after the Cayman Islands Companies Law was amended in April 2009. Until recently, a Cayman company could only combine with another company by way of "arrangement" which required the parties involved to apply the Grand Court of the Cayman Islands for approval.

The Certificate of Merger dated 3 August 2009 was issued by the Cayman Islands Registrar of Companies to Appleby’s client and signifies the first CIMA registered mutual fund structure to make use of the Companies (Amendment) Law, 2009.

The new legislation makes a distinction between a "consolidation" and a "merger". In a merger, one company remains as the surviving entity, having in effect absorbed the other merging parties that are then struck off and cease to exist. By comparison, in a consolidation, a new entity is formed from the combination of each participating company. The participating companies, as a consequence, cease to exist and are each struck off by the Registrar of Companies.

The funds lawyer involved with the transaction was Associate, Andre Ebanks. Andre stated "During these turbulent economic times, investment managers are constantly seeking ways to restructure their investments and the structures that lie beneath. This new legislation allows companies to combine without the need to go through a potentially costly court-driven process or, as Cayman mutual fund companies have done in the past, a somewhat cumbersome transfer process; involving a subscription-in kind, redemption, transfer of assets and the liquidation of the terminating fund. The provisions allow greater flexibility whilst providing clients with the benefit of reduced costs and time as the merger of the terminating fund and surviving fund is effected by operation of law."

Bryan Hunter, Partner and Cayman Corporate and Commercial Practice Group Head continued, "The revision to the Companies’ Law is a welcome update and feedback to date has been very positive. We have already been instructed by several clients to merge or consolidate companies and we expect to see a significant number of clients using these new provisions in the near future not only in the funds arena but in all areas of Cayman corporate law."

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