The Cayman Islands Society of Professional Accountants (CISPA) is welcoming the enactment of updated insolvency legislation in the Islands.
The Companies (Amendment) Law 2007 was originally enacted in late 2007, but at that time only two sections came into force.
Those two sections provided for the establishment of the Insolvency Rules Committee, which was tasked with drawing up the Rules and Regulations to give effect to the amended Law. The new Rules and Regulations have now been drafted by the Insolvency Rules Committee and will come into force, together with the other sections of the Companies (Amendment) Law 2007, on 1 March 2009.
CISPA stated that the significant update of Part V of the Companies Law, which deals with insolvency generally and the introduction of Part XVI, which deals with international co-operation, represent a major enhancement of the Cayman Islands’ legislative framework.
Taken together, the new legislation provides the jurisdiction with an up-to-date insolvency regime which is tailored to meet the needs of users of the Cayman Islands, taking into account its standing as a major financial centre.
Some of the more significant aspects of the legislative changes include:
Standing to file a winding up petition has been extended, to include contingent and prospective creditors;
Giving power to the Court to dismiss a winding-up petition filed by someone who is contractually bound not to present one;
A new section relating to Fraudulent Trading, adopting a similar concept from the English Insolvency law;
Voluntary liquidations – where a newly created Declaration of Solvency is now required from the directors. If such Declaration of Solvency is not given, the liquidation must be brought under the supervision of the Court;
The introduction of a new concept – that of Doubtful Solvency – which allows for shareholders as well as creditors to have representation on the liquidation committee;
The ability of the liquidation committee to appoint its own legal counsel, and have those legal fees and expenses paid out of the estate as an expense of the liquidation;
Voluntary liquidations – where a newly created Declaration of Solvency is now required from the directors. If such Declaration of Solvency is not given, the liquidation must be brought under the supervision of the Court;
The introduction of a new concept – that of Doubtful Solvency – which allows for shareholders as well as creditors to have representation on the liquidation committee;
Introducing some specific criteria for the eligibility of liquidators; and
Establish rules relating to liquidators’ remuneration.
The new Part XVI of the Companies Law sets out the way in which the Cayman Court has the power to make orders in aid of foreign insolvency proceedings. It allows discretion on the part of the Court, rather than being mandatory.
L.D.