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).
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. |
A U.S. House of Representatives Bill would amend the Bankruptcy Code to establish new provisions to address the special issues raised by troubled nonbank financial institutions.
Companies that the Financial Stability Oversight Council (FSOC) believes may be subject to FDIC receivership under the Orderly Liquidation Authority contained in Title II of the Dodd-Frank Act, and certain of their affiliates, are now subject to recordkeeping requirements related to their “qualified financial contracts”1 (QFCs).
Our October 2010 DechertOnPoint “FDIC Begins Action on Its Super-Resolution Rules for Covered Financial Companies” discussed how systemi-cally significant non-bank financial companies (“covered financial compa-nies”) may find themselves in unknown territory if the FDIC is appointed re-ceiver for them.
Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.
Title II of the Dodd-Frank Act establishes a new non-judicial receivership al-ternative for resolving troubled financial companies that could threaten the stability of the U.S. financial system (“Covered Financial Companies”), as described further below. The Federal Deposit Insurance Corporation (“FDIC”), on October 12, 2010, issued a notice of proposed rulemaking (the “Proposal”) to begin to implement the provisions of Title II.
The next few years will see the “redevelopment” of the law in two critical areas involving bank failures where the Federal Deposit Insurance Corpora-tion (“FDIC”) is appointed receiver: (i) the relative rights and claims of creditors of a bank or savings and loan holding company, including the FDIC; and (ii) D&O and professional liability. Significant decisions are be-ginning to be issued with regard to the former.