A warm welcome to the Summer edition of Conyers Coverage. The whirlwind that is the Cayman Islands (re)insurance industry continues to blow with gusto! To keep you updated on recent developments, we include various items from our Insurance, Regulatory and Litigation teams, we ponder the possibilities and implications for the Cayman Islands in potentially securing Qualified Jurisdiction status with the NAIC and lots more beyond. We think there’s something for everyone in our latest edition so please dig in.

To NAIC or Not to NAIC?

On August 31, 2022, significant amendments to Part V of the Cayman Islands Companies Act (“Act”) took effect to revamp the Cayman Islands restructuring regime. These amendments introduced the new role of a court-appointed “Restructuring Officer” and a dedicated “Restructuring Petition.” The Cayman Islands restructuring officer regime (“RO Regime”) shares certain features with the Chapter 11 bankruptcy procedure in the US and Canada’s Companies’ Creditors Arrangement Act.

The new restructuring regime in the Cayman Islands distinguishing between winding‑up and recovery gives multinationals another option, say Alex Davies and Spencer Vickers

Recent amendments to part V of the Cayman Islands Companies Act have updated the domestic restructuring regime and introduced the new role of a court‑appointed restructuring officer and a dedicated restructuring petition. The Cayman Islands restructuring officer regime shares certain features with the administration regime in the UK and the Chapter 11 bankruptcy procedure in the US.

引言

英国终审法院最近就 BTI 2014 LLC 诉 Sequana SA 及其他 [2022 UKSC 25] 一案（“Sequana 案”）颁布一份万众期待的判决。Sequana 案的法理将于开曼群岛以至其他普通法司法管辖权区成为极具说服力的法律根据。

Sequana 案是一项有用的判决，原因如下：

• 该案不但确认董事对股东负有受信责任而须真诚以公司最佳利益行事的传统观点，同时指出董事于公司无力偿债或濒临无力偿债或可能进行无力偿债清盘或管理时，须考虑债权人利益或以其行事（“债权人利益责任”）。
• Sequana 为英国终审法院审理的首宗案件裁定董事于哪些情况下必须考虑公司债权人利益，不论债权人利益责任可否于公司无力偿债前触发，以及股东可否认可对债权人利益责任的潜在违反。

背景

The United Kingdom Supreme Court (the “UKSC”) recently delivered its eagerly anticipated judgment in BTI 2014 LLC v Sequana SA and others[2022 UKSC 25] (“Sequana”). The reasoning in Sequanawill be highly persuasive in the Cayman Islands, as well as other common law jurisdictions.

Sequana is a helpful decision for at least the following reasons:

A fundamental principle of insolvency law in the Cayman Islands is that upon the commencement of a liquidation of a company, a line is drawn in the sand and the assets of an insolvent company should be distributed on a pari passu basis (e.g. each unsecured creditor should share equally in the available assets of the company). While subject to some exceptions (like any good fundamental principle of law), the concept that all unsecured creditors should be on “equal footing” is the basis for a wide array of insolvency legislation and case law.

The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.

U.S. Bankruptcy Judge Dennis Montali recently ruled in the Chapter 11 case of Pacific Gas & Electric (“PG&E”) that the Federal Energy Regulatory Commission (“FERC”) has no jurisdiction to interfere with the ability of a bankrupt power utility company to reject power purchase agreements (“PPAs”).

The Supreme Court this week resolved a long-standing open issue regarding the treatment of trademark license rights in bankruptcy proceedings. The Court ruled in favor of Mission Products, a licensee under a trademark license agreement that had been rejected in the chapter 11 case of Tempnology, the debtor-licensor, determining that the rejection constituted a breach of the agreement but did not rescind it.

Few issues in bankruptcy create as much contention as disputes regarding the right of setoff. This was recently highlighted by a decision in the chapter 11 case of Orexigen Therapeutics in the District of Delaware.