The Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding-up petition, pursuant to Section 99 of the Companies Law (2020 Revision).
Background
In the 2018 Autumn Budget, the Chancellor announced his intention to reintroduce Crown Preference with effect from 6 April 2020. Due to the attempts to prorogue Parliament and the General Election last year, the necessary legislation was not passed. However, it has now been introduced in the Finance Bill 2020, with the later start date of 1 December 2020.
The Cayman Islands Court of Appeal has provided much needed clarification of the test for validating certain transactions by companies that are subject to a winding up petition, pursuant to section 99 of the Companies Law (2020 Revision) (the "Companies Law").
The Legal Issue of Principle
Domestic Procedures
What are the principal insolvency procedures for companies in your jurisdiction? | Liquidation: voluntary and official. Cayman does not have an equivalent to the English concept of the company administration or to the Chapter 11 process in the United States. Schemes of Arrangement/“Soft Touch Liquidations” allow the company to enter into an agreement with its shareholders and/or creditors. |
What Is the "Rule in Gibbs"?
The rule in Gibbs is a long-established common law principle in which the Court of Appeal determined that a debt governed by English law cannot be discharged or compromised by a foreign insolvency proceeding(Anthony Gibbs and Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399). The rule in Gibbs remains a fundamental tenet of English insolvency law.
Why Does the Rule in Gibbs Matter?