New Restructuring Officer Regime to be introduced in the Cayman Islands during 2022

During the course of 2022, Part V of the Cayman Islands Companies Act (the "Companies Act") will be amended to introduce a new restructuring officer regime available to companies in financial distress, which can be accessed without the need to present a winding up petition to the Grand Court of the Cayman Islands ("Cayman Court"). Upon filing the petition seeking the appointment of restructuring officers, an automatic and standalone restructuring moratorium will immediately arise which will have extraterritorial effect, similar to a Chapter 11 stay or English administration moratorium, within which a restructuring may be proposed and implemented (by way of a Cayman Islands scheme of arrangement, a restructuring process in a foreign jurisdiction or consensually, as between affected stakeholders).

The key features of the new regime will be as follows:

  • Companies may present a petition to the Cayman Court for the appointment of a restructuring officer on the grounds that (i) the company is or is likely to become unable to pay its debts; and (ii) intends to present a compromise or arrangement to its creditors (or classes thereof) either, pursuant to the Companies Act, foreign law or by way of a consensual restructuring.

  • Unlike provisional liquidation, the petition seeking the appointment of a restructuring officer may be presented by the directors of a company: (i) without a shareholder resolution and/or an express power to present a petition in its articles of association; and (ii) without the need to file a winding up petition as a prerequisite.

  • A standalone restructuring moratorium will automatically arise on filing the application seeking the appointment of restructuring officers, which will have an exterritorial effect, as a matter of Cayman Islands law.

  • Cayman Islands schemes of arrangement will be able – as a matter of Cayman Islands law – to compromise English law-governed debt, thereby expanding the scope of the applicability of the Cayman Islands restructuring regime to more debt restructuring situations.

  • For shareholder schemes of arrangement, the "headcount test" will be removed such that only the "majority in value" test is required to be satisfied to approve a proposed shareholder scheme of arrangement at the relevant meeting(s).

  • Secured creditors with security over the whole or part of the assets of the company will remain entitled to enforce their security without the leave of the Court and without reference to any restructuring officer.
 
To learn more about this regime, please read the article prepared by our Cayman Team INSOL World: New Restructuring Officer Regime to be Introduced into the Cayman Islands.

Walkers (Dubai) LLP has a full service Insolvency and Dispute Resolution team based in Dubai which regularly provides time-zone sensitive Cayman Islands and British Virgin Islands legal advice to a broad range of clients in the United Arab Emirates and elsewhere in the Middle East on all aspects of litigation, restructuring, insolvency and dispute resolution. Our clients include banks, financial institutions, stakeholders and creditors of offshore entities as well as the management or directors of offshore entities.  We also regularly assist lenders enforcing security in offshore structures and distressed entities in strategizing their refinancing and/or restructuring in both consensual and non-consensual situations, including the use of schemes of arrangement and other restructuring tools available in the Cayman Islands and BVI.

For more information on restructuring and insolvency, or if you require offshore legal advice, please contact any of the following individuals on the Insolvency and Dispute Resolution team in Dubai.

DUBAI
Cate BarbourSenior CounselT +971 4 363 7917cate.barbour@walkersglobal.com
Luke PetithSenior CounselT +971 4 363 7926luke.petith@walkersglobal.com
Carly KilshawSenior AssociateT +971 4 363 7944 carly.kilshaw@walkersglobal.com
Michael TestoriAssociateT +971 4 363 7925michael.testori@walkersglobal.com
Tania DiabParalegalT +971 4 363 7910Tania.Diab@walkersglobal.com

HONG KONG
Colette Wilkins QCPartnerT +852 2596 3307colette.wilkins@walkersglobal.com

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