Practical overview of offshore legal opinions in financing transactions


It is standard practice for lenders in financing transactions to request legal opinions from counsel in each jurisdiction in which a transaction entity is established or under which law transaction documents are governed. Set out below is a practical overview of some commonly asked questions by external and in-house legal counsel in relation to legal opinions in Jersey, Guernsey, Cayman Islands, the British Virgin Islands ("BVI") and Bermuda (together the "Offshore Jurisdictions").

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What are the kinds of legal opinions given in the Offshore Jurisdictions?

Broadly, general practice in the Offshore Jurisdictions follows the approach in most onshore jurisdictions, such as England and the United States, and local counsel will opine on (i) the capacity, power and authority of an entity (whether a company, limited partnership, trust etc.) established in that jurisdiction, including due execution ("Capacity Opinion") and (ii) the enforceability of the key transaction documents governed by the law of that jurisdiction ("Enforceability Opinion"). Typically the Enforceability Opinion will relate to security documents governed by the laws of the relevant Offshore Jurisdiction.

Often the Capacity Opinion and the Enforceability Opinion can be provided by the same counsel, as in English deals where a company incorporated in England and Wales enters into English law documents.  However, in cross border matters, they may be split and provided by counsel in different jurisdictions, e.g. if a Cayman company enters into an English law facility agreement and debenture, then the Capacity Opinion will be provided by Cayman Islands counsel and the Enforceability Opinion by English lawyers.

Similarly, there are conventions in the Offshore Jurisdictions regarding whether borrower or lender counsel provide the Capacity Opinion and/or the Enforceability Opinion.  Market practice in the Offshore Jurisdictions may vary depending on the type of financing (e.g. fund finance transactions or leveraged acquisitions financings) and the jurisdiction of instructing counsel and the client.

What form do legal opinions take in the Offshore Jurisdictions and are there any standard deviations from opinions usually given by English counsel?

As described above, legal opinions issued by counsel in the Offshore Jurisdictions follow the same format as those issued by English counsel, focusing on Capacity Opinions and Enforceability Opinions.

The form of these opinions is fairly well established in each of the Offshore Jurisdictions, though there is always some negotiation.

In addition, lenders may request additional 'non-standard' opinions to be included, often as a matter of internal policy.  Typical examples of additional opinions we are sometimes asked to include relate to income tax, value-added tax, no deduction or withholding and netting or set off provisions.

Is an opinion of 'good standing' given in the Offshore Jurisdictions and does it have a particular meaning?

In Jersey and Guernsey, this opinion is not commonly provided as it has no particular meaning.  A certificate of good standing in Jersey and Guernsey can be obtained from the local company registrar, though is not standard practice (as it would be in for example, the Cayman Islands or the BVI or, a certificate of compliance would be in Bermuda).  In the case of a Jersey company, such certificate confirms (in addition to certain information contained on the company register disclosed by a company search) that to the best of the registrar's knowledge and belief the company has complied with Jersey statutory requirements relating to filing of annual returns.

In the case of a Guernsey company, the certificate simply certifies that the Guernsey company has submitted its annual validation for the relevant year and remains on the register. Any opinion of good standing would therefore be qualified to such certification of the registrar and would not, for example, confirm the financial position of a company.

As noted, in Cayman, BVI and Bermuda, an opinion of 'good standing' is routinely provided as it means that the company is up to date on payment of its annual fees and has complied with certain filing requirements.

When does counsel in the Offshore Jurisdiction issue a legal opinion and are there any timing issues to be considered by onshore counsel?

As is typical in all banking and financing transactions, legal opinions are issued in relation to the relevant law on the closing of a transaction, referencing searches conducted on the closing date or the business day prior (as may be required for cross-border transactions in differing time zones). It is not customary to provide a time of issue in addition to the date.

If relying on searches conducted prior to date of issuance of the relevant opinion, it should be noted that relevant opinions will be given as at the search date or an assumption will need to be included that such searches remain true and correct on the opinion issue date.

A summary of the typical searches needed in each Offshore Jurisdiction and cut-off timings for same day and next day searches is set out at the end of this article.

Opinions are usually given in relation to executed and dated opinion documents, and can therefore be issued into escrow pending receipt of dated opinion documents, following which the opinion would be released from escrow.

Are there specific requirements in relation to reliance on an opinion in the Offshore Jurisdictions?

Reliance on the opinion is usually limited to the addressee of the legal opinion, which is the original lender(s) or agent. Disclosure of the opinion (on a non-reliance basis) is usually permitted to assignees of the addressee(s) (and provided it is not further disclosed), any specified persons entitled to disclosure under law or regulation and rating agencies. If lenders have any specific reliance language requirements, it is common to align such reliance to the specified form as provided by lenders.

Are there any applicable rules or regulations that may limit the issue of a legal opinion in the Offshore Jurisdictions?

There are no specific rules or regulations (including those of professional conduct) regulating the issue of legal opinions in the Offshore Jurisdictions.

Matthew Cowman Managing PartnerT +1 284 852

Joe HealeySenior CounselT +1 345 814

Ciaran BohnackerPartnerT +971 4 363

Zoë HallamGroup Partner*T +44 (0)1481 748
Kim PaivaGroup Partner*T +44 (0)1481 748

Andy RandallManaging PartnerT +852 2596

Lisa EllefsenAssociateT +44 (0) 1534 700
Julia KeppePartner, Walkers (CI) LPT +44 (0) 1534 700
Jon Le RossignolPartner, Walkers (CI) LPT +44 (0) 1534 700

Patrick OrmondPartnerT +44 (0)20 7220
Catherine OvertonPartnerT +44 (0)20 7220

John RogersManaging PartnerT +65 6595

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