New restructuring tool in the Cayman Islands
The Cayman Islands has introduced the Companies (Amendment) Bill 2021 to amend the Companies Act (2021 Revision) (theAct) which would allow for the restructuring of a company under the supervision of a restructuring officer and provide for a stay on creditors actions when a company is undergoing a restructuring.
The first key proposed change is the provision for the appointment of a restructuring officer by the court on the petition of a company, where the company is or is likely to become unable to pay its debts and intends to present a compromise or arrangement to its creditors, either pursuant to the Act, the law of a foreign country or by way of a consensual restructuring. The power to present such a petition is given to the company acting by its directors without the requirement of a resolution of its members or an express power in its articles of association.
Second is that any time after the presentation of a petition for the appointment of a restructuring officer, no proceedings shall be proceeded with or commenced against the company (including in foreign countries), no resolution shall be passed for the company to be wound up and no winding-up petition may be presented against the company, except with leave of the court. A powerful tool for companies when facing creditor pressure. In keeping with its creditor friendly regime, the moratorium does not prevent secured creditors from enforcing their security.
Other changes introduced by the Bill include:
- Providing for the appointment of an interim restructuring officer on an ex parte application by a company.
- Removing the requirement for a headcount of the majority of the members or class of members of a company when voting on schemes of arrangement, replacing it with a requirement for approval from 75 per cent in value (with no majority in number requirement).
- Introducing provisions to facilitate the reconstruction and amalgamation of companies.
- Empowering the directors of a company incorporated before the commencement of this amending legislation, where expressly provided for in the articles of association, to present a winding-up petition or where a winding-up petition has been presented, to apply for the appointment of a provisional liquidator on behalf of the company. For a company incorporated after the commencement of the legislation no express power is required in the articles of association; however, the company’s articles of association may expressly remove or modify the directors’ authority to present such petitions.
- Amending the criteria for the appointment of a provisional liquidator - the court may appoint one if it considers it appropriate to do so.
Watch out for future blogs as we explore the detail of the amending legislation.