As we draw closer to the end of 2022, many clients will be considering their Cayman Islands structures and querying whether any entities are surplus to requirements.
The desire to wind up any Cayman entities before the end of the year is fueled primarily by the need to avoid any annual fees for the maintenance of the Company being incurred next year (2023).
To avoid those fees the voluntary liquidation of a Cayman Company would typically need to commence in late November early December (at the latest) with the final meeting being held before the end of January.
This timetable results in an effective dissolution date into the next calendar year, while still avoiding the government fees for that year.
If a dissolution is not completed (i.e. if the final return is not filed) by 31 January then the full annual return fees for the new-year are due and payable to the Cayman Islands Government.
If the liquidation is more complicated then more time would be required and an even earlier start date would be necessary. It is important to note that the Companies Act (as Revised) stipulates that a company is dissolved upon the expiration of 3 months from the registration of the final return and this timing must be considered if a 31 December (or earlier) dissolution date is required. If you do not need a 31 December (or earlier) dissolution date then please note it is possible to complete the liquidation process before year end (without the need for the publication of expensive extraordinary gazettes etc.) if the liquidation process is started no later than 25 November 2022.
The above timing considerations also come into play if there may
be increased operational efficiencies in completing the dissolution
within the current calendar year if additional regulatory filings
and other costs for stub years can be avoided.
For example, investment funds that are registered with the Cayman
Islands Monetary Authority ("CIMA") may need to consider
an earlier commencement date to ensure that the final audited
financials are completed and filed with CIMA prior to the final
meeting of the Fund. CIMA requires that a Fund undertakes a final
audit for the period either up to the date of the appointment of
the third party liquidator or to the date of the full payment of
the final redemptions.
Strike Offs
The option to strike off a company remains an attractive (and cheaper) option for many clients whose companies do not have an active history of trading or were set up only to hold a single asset.
Whilst a strike off does not entail the process of appointing a liquidator and carrying out a formal liquidation it should be remembered that a) the Registrar only strikes off companies in batches at the end of each financial quarter and as such if a year-end dissolution is required then a strike off application should be filed ideally no later than November and b) a strike off remains reversible within a 10 year time frame and should not be viewed as having the same finality of a formal liquidation.
Conclusions
HSM Chambers has a wealth of expertise in advising on both voluntary liquidations, official liquidations and strike offs.
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.
