Help is at hand: Options for investors in troubled Cayman joint ventures

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Cayman companies are frequently used for joint ventures between international parties, especially where the ultimate aim is a listing on a major stock exchange such as the NASDAQ or LSE.

However, given the economic climate many companies may now be unable to meet the performance expectations or exit terms that were originally negotiated. As an investor, it is important to understand what options may be available to you for realising your investment, and any potential liabilities.

In many cases, the terms contained in the original agreements such as the shareholders’ agreement or noteholders’ agreement and the company’s constitutional documents will be the place to start to see if there are any less nuclear options available. However, when all else fails investors may need to consider the termination of the company.

This article examines the liquidation options available to noteholders and shareholders in Cayman companies. It also examines a recent line of cases in which the Cayman court allowed the provisional liquidation regime to be used for restructuring purposes. Finally, it examines potential liabilities, including for directors.

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This article was first published by Thomson Reuters Westlaw Today.