The following briefing provides a round-up of the Cayman legal and regulatory developments during the third quarter of 2022 that may be of interest to funds clients. We are pleased to note that there is nothing critical or requiring immediate action at this time.

Summary of recent legal and regulatory developments

Over the past two or three years, we have seen an increasing number of cases where a client holds and wishes to sell or transfer shares in a Cayman Islands company which is in liquidation, or is seeking to purchase shares in such a company from another party.  In those circumstances, the transfer of the shares would be void absent the validation of the Grand Court of the Cayman Islands, as a result of section 99 of the Companies Law (2013 Revision) ("Section 99").  Section 99 is in the following terms:

The Senate Judiciary Committee in February approved Delaware Democratic Senator Chris Coons to head the Subcommittee on Bankruptcy and the Courts for the 113th Congress. This gives Coons oversight of the nation’s bankruptcy court system, as well as court administration and management, judicial rules and procedures, the creation of new courts and judgeships, and legal reform and liability issues.

A years-long political duel over whether California should control local government bankruptcies was resolved on October 9, 2011. Chapter 9 of the Bankruptcy Code provides specifically for the reorganization of cities and towns, taxing districts, municipal utilities, and school districts. California Governor Jerry Brown (D) signed legislation prohibiting local municipalities from filing for bankruptcy unless they first negotiate with creditors using a “neutral evaluation process” or vote to declare a fiscal emergency after a public hearing.

The House Judiciary Committee recently heard testimony on the benefits and pitfalls of proposed legislation that would change bankruptcy venue rules by imposing limitations on where corporations may file for bankruptcy protection. The hearing came in the wake of a statement by Judiciary Committee Chairman Lamar Smith, R-Texas, in which he asked how Enron had been able to file its bankruptcy case in Manhattan considering that Enron was based in, and had substantially all of its assets and operations in, Texas.