CAYMAN ISLANDS Law and Practice Contributed by: Sarah Humpleby, Alexandra Franklin, Peter Kendall and Sam Hall, Walkers
• originally allotted to them, held by them for at least six months prior to the presentation of the petition, or inherited from the original shareholder. The grounds for winding up a Cayman company are when: • the company has passed a special resolution requiring the company to be wound up by the Cay - man Court; • the company has not commenced its business within a year from its incorporation or has sus - pended its business for a whole year; • the period fixed for the duration of the company by the articles of association is expiring, or an event occurs, upon the occurrence of which it is provided by the articles of association that the company is to be wound up; • the company is unable to pay its debts as they fall due; • the court is of the opinion that it is just and equita - ble that the company should be wound up; or • the Cayman Islands Monetary Authority (CIMA) may present a winding up petition in respect of any company which is carrying on business within the Cayman Islands upon the grounds that it is not duly licensed or registered to do so under applica - ble regulatory or other laws. Provisional Liquidation Provided there is a prima facie case for making a wind - ing-up order, an application for provisional liquidation may be made by creditors or shareholders of the com - pany (and, where the company is a regulated entity, the Cayman Islands Monetary Authority (“CIMA”)) for the appointment of provisional liquidators to preserve and protect the company’s assets until the hearing of a winding-up petition in circumstances where there are concerns about: • the misuse or dissipation of the company′s assets; • the oppression of minority shareholders; or • mismanagement or misconduct on the part of the company’s directors. Provisional liquidation may also be used as a restruc - turing tool where the directors of a company consider that the company is liable to be wound up under the
Companies Act. The directors may cause the compa - ny to petition for its own winding-up and apply for the appointment of provisional liquidators in order to pre - sent a compromise or arrangement to creditors with the protection of an automatic moratorium against proceedings being brought or continued against the company. Provisional liquidators are appointed and supervised by the Cayman Court. Restructuring Officer Regime A Cayman Islands incorporated company may present a petition to the Cayman Court for the appointment of a restructuring officer on the grounds that (i) the com - pany is, or is likely to become, unable to pay its debts; and (ii) the company intends to present a compromise or arrangement to its creditors (or classes thereof), pursuant to the Companies Act, foreign law or by way of a consensual restructuring. Unlike provisional liquidation, the petition seeking the appointment of a restructuring officer may be present - ed by the directors of a company: (i) without a share - holder resolution and/or an express power to present a petition in its articles of association; and (ii) without the need to file a winding-up petition as a prerequisite. Upon filing the petition seeking the appointment of restructuring officers, an automatic and standalone restructuring moratorium will immediately arise which will have extraterritorial effect within which a restructuring may be proposed and implemented, including by way of a Cayman Islands scheme of arrangement (see below). A company may also apply for the appointment of a restructuring officer on an interim basis pending the hearing of the petition. Scheme of Arrangement A scheme of arrangement is a court-approved com - promise or arrangement between a company and its creditors (or any class of them) or its shareholders (or any class of them). There is no statutory definition of the terms “compromise” or ”arrangement”, but it is well-established that a “compromise” or ”arrange - ment” requires an element of “give and take” between the company and the scheme′s creditors or share -
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