32
Legal Expert Board
OCTOBER 2013
Insolvency and Restructuring Cayman Islands
PaRt v – coMPanIES LaW (2012 REvISIon).
The liquidation, or “winding-up” as it is termed in the Companies Law (2012 Revision), is the means whereby the life of the company is ended, and the property of the company is administered for the benefit of its creditors and members. Part V of the Companies Law dealing with the winding up of solvent and insolvent companies and limited partnerships should be carefully read together with the Companies Winding Up Rules and the Insolvency Practitioners’ Regulations (available to download at
http://gazettes.gov.ky/).
case law has developed (available online at
www.judicial.ky). Winding-up petitions will be heard by the Financial Services Division of the Grand Court , created in 2009, and served by six judges with a high level of practical experience and judicial expertise.
A
The two main types of winding up are (1) compulsory, under order of Court or (2) voluntary, by resolution of
s the Cayman Islands have evolved into a major financial centre a considerable body of
the company is unable to pay its debts or that is just and equitable that the company should be wound up. The winding-up procedure is not for the resolution of disputed debts or other cases that should properly be resolved by writ actions, or other litigation processes.
the
shareholders, or ,as provided in the memorandum and articles of association. In both cases, an official liquidator is appointed. A voluntary winding up may be ordered to continue under the supervision of the Court.
There have been a number of the cases of compulsory winding up on the grounds
The legal test for solvency is on a “cash flow” and not on a “balance sheet” basis. If a company fails to pay what is presently due and owing to the petitioning creditor, the court has jurisdiction to make a winding-up order.
(b) If there is a bona fide and substantial dispute as to the existence of the debt, the court will dismiss or stay a petition.
(c) In an appropriate case, the court may determine the disputed debt issue on the hearing of the petition, i.e. where the court doubts that the debt
is disputed on substantial
grounds, or where a remedy may be lost or injustice might result.
The company’s
unrealised contingent assets on its balance sheet are not a factor enabling the court to exercise its discretion against winding it up.”1
(a) A person with a debt is due and owing may present a petition to wind up as a “creditor”.
(d) Where the winding-up court decides to hear a petition based on a disputed debt, it will only make a winding-up order on the grounds that the company is unable to pay its debts or that it is just and equitable to wind up, having determined that the petitioner
probabilities, a creditor of company.2
is, on a balance of the
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