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Preenforcement Steps and Enforcement Action Under Bermuda BVI and Cayman Law

Sep 30, 2022

Advisory
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The full strength of the economic headwinds facing the UK economy is not yet clear, but a helpful recent report by insolvency and restructuring adviser Begbies Traynor provided some useful numbers around the attitudes of businesses.

The report found that in the three months to the end of June, 1,957 companies were in a state of “critical financial distress” – 37% more than the same period in 2021. A further 582,000 companies were in “significant financial distress”, and perhaps most worrying, the period between April and June saw 5,629 businesses in the UK becoming insolvent – the worst three-month period since the Autumn of 2009.

Against that backdrop, it seems inevitable that there will be an impact on businesses with an offshore element to their structuring – and it is far from clear that lenders and creditors will be prepared to offer the same forbearance and flexibility that they did during the Covid-19 pandemic. Over the past few years, Walkers’ transactional teams have routinely been asked for offshore law advice on enforcement options at the outset of transactions – it is likely that this advice will be dusted off and options reviewed in the coming weeks and months, as the picture of the scale and length of the change in economic fortunes becomes clearer.

With that in mind, it is a good time for secured creditors with Bermuda, British Virgin Islands (“BVI”) and/or Cayman Islands (“Cayman”) law governed share security to consider practical steps that they can take now, together with the development of a potential enforcement strategy, to make a future enforcement of that security as efficient and straight-forward as possible.

Such steps would include:

  • ensuring that fully executed and dated copies of the relevant security documents are in hand (including any amendments or variations thereto) (whether on electronic file or available in a transaction bible);
  • ensuring that any contractual, ancillary deliverables under the security documents are in hand (including any signed but undated share transfer form(s), original share certificates (if any), irrevocable power(s) of attorney, annotated registers of members, undertakings that the company will register the share transfer form(s) upon enforcement, and other ‘self-help’ deliverables);
  • ensuring that the relevant local law security documents and deliverables have been reviewed by Bermuda / BVI / Cayman counsel (as applicable) and that any issues that may impact on enforcement have been addressed;
  • ensuring that any relevant public searches have been undertaken in conjunction with legal counsel (for example, searches at the BVI Registry to review the status of the BVI target company and public registration of security in the BVI, and obtain (as applicable) copies of filed, annotated Registers of Members or Certificates of Registration of Charge);
  • arranging for full CDD/KYC information to be collated up-front and in advance for (i) any potential transferees of the secured shares (i.e. the secured creditor or its nominee(s)) and (ii) new directors of the BVI or Cayman company that the secured creditor may wish to appoint using the voting rights on the secured shares;
  • engaging with valuation experts and developing a plan for the valuation and marketing of the secured assets;
  • carrying out a review to check that there are no regulatory or other consents required in connection with the proposed enforcement steps (for example, the consent of the Bermuda Monetary Authority is generally required prior to a transfer of shares in a Bermuda company and the entity in question may be a regulated entity in the relevant jurisdiction) ; and
  • ensuring that where the security has been given in support of a foreign law loan obligation (which will typically but not always be English law), the proposed enforcement steps are consistent with the terms of the foreign law loan documentation and the enforcement process is coordinated amongst both Bermuda / BVI / Cayman and foreign law counsel (as applicable).

Whilst clearly certain secured creditors will have already addressed some, if not all, of these steps in previous routine security reviews and planning , it is nevertheless likely that some of the work, with respect to pre-enforcement planning, strategy and practical preparation, will need to be refreshed in the coming weeks and months.

Walkers’ cross-disciplinary teams have significant experience in advising on pre-enforcement steps and enforcement action under Bermuda, BVI and Cayman law, respectively, and work with teams of experts in Guernsey, Irish and Jersey law from our offices in Europe, Asia and the Americas.

Contacts

If you have any queries on the above or would like to discuss in more detail please do not hesitate to contact us or your regular Walkers contact.

Authors

Matthew Cowman

Matthew Cowman

Managing Partner/British Virgin Islands

T/+1 284 852 2208
M/+1 284 542 2208
E/Email Matthew Cowman
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Fraser Hern

Fraser Hern

Partner, Walkers (CI) LP/Jersey/London

T/+44 (0) 20 7903 8702
M/+44 (0) 7797 777 417
E/Email Fraser Hern
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Kevin Taylor

Kevin Taylor

Managing Partner/Bermuda

T/+1 441 242 1510
M/+1 441 525 1510
E/Email Kevin Taylor
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Andrew Chissick

Andrew Chissick

Partner/London

T/+44 (0) 2072 204 994
M/+44 (0) 7837 462 561
E/Email Andrew Chissick
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James Denham

James Denham

Partner/London

T/+44 (0) 2072 204 978
M/+44 (0) 7487 510 931
E/Email James Denham
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Matthew Goucke

Matthew Goucke

Partner/Cayman Islands

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M/+1 345 525 1084
E/Email Matthew Goucke
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Adam Hinks

Adam Hinks

Partner/Singapore

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M/+65 8112 1173
E/Email Adam Hinks
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Rosalind Nicholson

Rosalind Nicholson

Partner/British Virgin Islands

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M/+1 284 542 2237
E/Email Rosalind Nicholson
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Catherine Overton

Catherine Overton

Partner/London

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M/+44 (0) 7976 756 891
E/Email Catherine Overton
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Luke Petith

Luke Petith

Partner/Dubai

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M/+971 54 492 3553
E/Email Luke Petith
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KEY CONTACTS

Get in touch with our team

Matthew Cowman
Matthew Cowman

Matthew Cowman

Managing Partner

British Virgin Islands

T

+1 284 852 2208

M

+1 284 542 2208

E

Email Matthew Cowman
View profile
Fraser Hern
Fraser Hern

Fraser Hern

Partner, Walkers (CI) LP

Jersey

London

T

+44 (0) 20 7903 8702

M

+44 (0) 7797 777 417

E

Email Fraser Hern
View profile
Kevin Taylor
Kevin Taylor

Kevin Taylor

Managing Partner

Bermuda

T

+1 441 242 1510

M

+1 441 525 1510

E

Email Kevin Taylor
View profile
Andrew Chissick
Andrew Chissick

Andrew Chissick

Partner

London

T

+44 (0) 2072 204 994

M

+44 (0) 7837 462 561

E

Email Andrew Chissick
View profile
Matthew Goucke
Matthew Goucke

Matthew Goucke

Partner

Cayman Islands

T

+1 345 914 6332

M

+1 345 525 1084

E

Email Matthew Goucke
View profile
Adam Hinks
Adam Hinks

Adam Hinks

Partner

Singapore

T

+65 6603 1657

M

+65 8112 1173

E

Email Adam Hinks
View profile
Rosalind Nicholson
Rosalind Nicholson

Rosalind Nicholson

Partner

British Virgin Islands

T

+1 284 852 2237

M

+1 284 542 2237

E

Email Rosalind Nicholson
View profile
Catherine Overton
Catherine Overton

Catherine Overton

Partner

London

T

+44 (0) 2072 204 984

M

+44 (0) 7976 756 891

E

Email Catherine Overton
View profile
Luke Petith
Luke Petith

Luke Petith

Partner

Dubai

T

+971 4 363 7926

M

+971 54 492 3553

E

Email Luke Petith
View profile
James Denham
James Denham

James Denham

Partner

London

T

+44 (0) 2072 204 978

M

+44 (0) 7487 510 931

E

Email James Denham
View profile

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