Following the growing trend of companies participating in acquisitions and corporate restructurings, the rigorous procedure resulting from liquidation becomes incumbent to fully understand before a company’s directors and shareholders propose to walk through this route.

Introducing Liquidation

The new United Arab Emirates (UAE) Insolvency Law (Federal Law No.9 of 2016) (Insolvency Law) was published in the UAE Gazette on 29 September 2016 and came in to force three months later on 29 December 2016. The Insolvency Law is a federal law that applies to all seven emirates comprising the UAE. The initial view from market participants is that by replacing the old insolvency law, which placed a greater emphasis on creditor protections and formal bankruptcy proceedings alongside criminal penalties, the Insolvency Law is an overdue but welcome development.

Voluntary liquidation or Strike-off? - Alternatives to voluntarily achieving the conclusion of operations and dissolution of Cayman companies

When a fund fails, the disappointed investors’ sole hope of recompense often rests on the fund’s liquidators gathering in and distributing pari passu as many of the fund’s assets as possible. The judgment of the Cayman Islands Court of Appeal in Skandinaviska Enskilda Banken AB (Publ) v Simon Conway and David Walker (CICA 2 of 2016), delivered on 18 November 2016, clarifies aspects of the liquidators’ power to claw back certain types of redemption payments made shortly prior to liquidation.

This guide outlines the procedure for a voluntary liquidation of a solvent Cayman Islands exempted company and the duties of its liquidator. It also sets out the process for striking an exempted company off the Register of Companies in the Cayman Islands.

Voluntary liquidation

A Cayman Islands exempted company can be wound up voluntarily:

Stuart Cullen and Benjamin Drakes, Dentons LLP

This is an extract from the 2023 edition of GRR's the Americas Restructuring Review. The whole publication is available here.

In summary

As year end approaches, it is time to start planning the liquidation of Cayman Islands entities that have reached the end of their life cycle to ensure that unnecessary fees are not incurred.

A statutory demand is a formal demand for payment of a debt made by a creditor to a debtor. It may be used as the basis for an application for a petition to wind up a Cayman company.

Service and content of Statutory Demand

The Companies Winding up Rules 2008 (as amended) provide guidance as to the form and content of a statutory demand as well as the mode of service within the Cayman Islands.

A statutory demand should be in the format of CWR Form 1 and must be signed by:

When Cayman Islands funds undergo liquidity stress on their balance sheet due to holding illiquid assets or irregular large redemption requests, directors of Cayman Islands funds generally consider mechanics to provide for an orderly restructure to meet redemption requests which arise. Common arrangements are to implement a “redemption gate” which limits redemptions to a certain percentage of shares in the fund or a stronger response such as a suspension of all redemptions.

The Privy Council's recent judgment in Weavering^[1]upheld the decisions of the Cayman Islands Grand Court and Court of Appeal that payments made to redeemed investors immediately prior to the fund's liquidation were preference payments under section 145(1) of the Companies Law (2018 Revision) (Law), and must be repaid.