CAYMAN ISLANDS Law and Practice Contributed by: Norman Klein and Adam Johnson, Appleby
Islands exempted company or a Cayman Islands ordinary non-resident company). Where the amount of money to be advanced on the security of any property by way of mortgage is unlimited, the security is to be available for such an amount as the ad valorem duty paid thereon extends to cover. If any advance is made in excess of the amount covered by that duty, the original instrument may be stamped-up with the additional ad valorem duty required to cover the total amount then to be secured. A mechanism exists through which “double duty” on separate security instruments that secure the same debt can be avoided. In such cases, the ad valorem duty may be paid on the primary security instrument, and the other secu - rity instruments can be expressed to be “collat - eral”, “auxiliary”, “additional” or “substituted”, and attract a fixed rate of duty at KYD50. Most other instruments and documents are sub - ject to a fixed rate of stamp duty in compara - tively nominal amounts. Registrable instruments (such as legal charges over real estate) are also subject to relatively immaterial registration fees. A release of mortgage over immovable property attracts a fixed rate of duty at KYD50. It is customary for stamp duty and registration fees to be paid by the borrower. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no legal rules or requirements that must be complied with before an entity can give valid security. Such entities must, however, be empowered to do so/not restricted from doing so by their constitutional documents. Often only board approval is necessary, although the entity’s
constitutional documents should be checked for any further requirements or approvals. It would be prudent to obtain shareholder approval in any case where an entity is guaranteeing or pledging assets as security for another party’s liabilities. 3.6 Formalities When a Borrower Is in Default The priority of enforcement options applicable to security interests, and the typical range of time needed to successfully enforce a security interest, would depend upon the type of security interest in question. In terms of legal charges registered against Cay - man Islands real estate, the security is enforce - able pursuant to its terms in conjunction with the provisions of the Registered Land Act (2018 Revision). The Registered Land Act (2018 Revision) pro - vides a statutory power of sale by public auction, power to lease and power to appoint receivers. Commonly, a legal charge will vary and extend the statutory provisions to give the lender wider powers. To the extent the powers contained in the legal charge vary or are in addition to those created by the Registered Land Act (2018 Revi - sion), they may not be acted on without an order of the court. Proposals to reform mortgage enforcement have been published, but have not yet been finalised or implemented. The priority of legal charges is determined by registration at the Cayman Islands Land Reg - istry.
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