This briefing paper explains schemes of arrangement under Cayman Islands law. Under sections 86 and 87 of the Companies Law (2013 Revision) the Grand Court may sanction a compromise or arrangement between a company and its creditors or members or any class of them.
The new Exempted Limited Partnership Law, 2014 (the new “ELP Law”), which repeals and replaces the current law, is shortly expected to come into force in the Cayman Islands. The ELP Law recognises developments in commercial practice, clarifies certain matters in order to ensure consistency of advice and allows for greater contractual flexibility to accommodate developing trends in the formation, regulation and operation of exempted limited partnerships.
In a recent judgment, the Cayman Islands Court of Appeal has confirmed the scope of the jurisdiction of the Grand Court, under sections 241 and 242 of the Companies Law (2013 Revision) (the “Law”), to assist foreign liquidators and trustees of foreign companies and other entities in foreign bankruptcy proceedings in their jurisdiction of incorporation by reversing pre-liquidation transactions under transaction avoidance legislation.
In an unreported judgment in ICP Strategic Credit Income Master Fund Ltd. delivered on 4 April 2014, Mr Justice Jones has helpfully confirmed and clarified Cayman Islands law and procedure in respect of applications by liquidators for approval to (i) bring proceedings in the name of the company, (ii) enter into litigation funding agreements with litigation funders, and (iii) enter into contingency fee agreements with the liquidators’ lawyers.
The Privy Council gave its awaited judgment in Fairfield Sentry Limited (in liquidation) v Alfredo Migani and others [2014] UKPC 9, holding that certain documents issued by the fund’s administrator were binding certificates of the net asset value per share and redemption price, and that the fund’s claims to recover redemption payments on the ground of unjust enrichment failed since the redeeming shareholders received the amounts due under the governing documents.
The Cayman Islands Monetary Authority (CIMA) issued its Statement of Guidance of Corporate Governance for Regulated Mutual Funds (SOG) in January 2014. In response to the SOG it is clear that regulated mutual funds (Funds) should take some immediate steps to ensure continued compliance with the expectations of CIMA.
In June 2011, the Cayman Islands Government announced its intention to introduce legislation providing for the registration of master funds domiciled in the Cayman Islands.
Following months of consultation with industry and stakeholders, the Cayman Islands Government has, on 5 December 011, passed the Mutual Funds (Amendment) Bill, 2011 providing for the registration of master funds of the Cayman Islands. There remain certain procedural steps to bring this piece of legislation into effect, although it is expected that it
will happen in the coming days and weeks, and in any event before the end of 2011, following
which Cayman Islands master funds will be required to be registered with CIMA.
The Cayman Islands looks well placed to ensure the Alternative Investment Fund Managers Directive (AIFMD) does not adversely impact the use of Cayman Islands vehicles when it comes into force on 22 July 2013.
Effective from 1 March 2013, the Companies Winding Up (Amendments) Rules 2013 introduce amendments to the Winding Up Rules 2008. The advisory sets out the significant amendments to the Rules.
The Cayman Islands’ Court of Appeal has now delivered its judgment in the case involving the winding up of FIA Leveraged Fund (the “Fund”). In dismissing the appeal, the Court of Appeal held that based on the wording in the offering documents for the Fund, the in specie distribution in question could only be made using assets from the Fund’s portfolio (the Fund was fully invested in the ultimate master fund, Fletcher International Ltd. (“The Master Fund”)) that were held by the Fund at the time when the investor was entitled to be paid its redemption monies. Further, even if the Fund’s documents stated that the directors of the Fund had a complete discretion as to the value of the assets to be distributed to the investor, that discretion is still limited as a matter of necessary implication by concepts of honesty, good faith and genuineness and a need for the absence of arbitrariness, capriciousness, perversity and irrationality.