CAYMAN ISLANDS Law and Practice Contributed by: Alan Bercow, Jae Shin and Ross McLeod, Appleby
Global Funds Management Asia Ltd v Securities Commission (1995) 2 AC 500 and Bilta (UK) Ltd v Nazir (2015) UKSC 23. Under this approach, a corporate entity can be liable for fraud when: • the fraudulent acts or knowledge are attrib - utable to individuals who represent the company’s “directing mind and will” – typi - cally, directors, senior officers, or those with authority to bind the company; • the individual was acting within the scope of their authority; and • the acts were performed in the course of corporate business. The Cayman Islands courts have confirmed this approach (Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and HSBC Securities Services (Luxembourg) SA [2017] 2 CILR 334). An important limitation applies through the “fraud on the company” exception recognised in In re Hampshire Land Co [1896] 2 Ch 743. Where a director or officer perpetrates fraud against the company itself, their knowl - edge is not attributed to the company. For financial services companies operating in the Cayman Islands, the Anti-Money Launder - ing Regulations (2025 Revision) impose addi - tional requirements designed to prevent fraud, with potential corporate liability for regulatory breaches even without direct board knowledge, if proper systems were not established. 3.2 Claims Against Ultimate Beneficial Owners Direct claims against ultimate beneficial owners (UBOs) are possible in Cayman Islands courts by piercing or lifting the corporate veil in limited circumstances. Cayman Islands courts have
confirmed in Algosaibi v Saad [2018] 3 CILR 1 that they will take the same approach as in Prest v Petrodel Resources in the UK Supreme Court – namely, where the corporate structure is a mere “façade” concealing true facts, the com - pany is being used as a device to evade legal obligations or frustrate legal remedies, and there is evidence of impropriety beyond the fact that the company was used for wrongdoing. The Cayman Islands Court of Appeal noted in Walkers v Arnage Holdings Ltd [2021] 1 CILR 347 that a decision to lift the corporate veil is one that involves an intense scrutiny of the facts and that the exceptional circumstances that permit disregard of the separate legal personality of a corporation are highly sensitive to the facts of the particular case. Alternative ways of seeking remedies against UBOs include claims on the basis that: • the UBO acted as a shadow director of the company – ie, was a person whose directions or instructions the directors of the company were accustomed to acting in accordance with (Section 89 of the Companies Act); • the UBO was involved in an unlawful means conspiracy; • the UBO was liable in knowing receipt or dishonest assistance or for restitution (as described in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts ). 3.3 Shareholders’ Claims Against Fraudulent Directors The Cayman Islands allows shareholders to bring derivative claims on behalf of companies against fraudulent directors, subject to obtaining permission from the court to continue the claim once a defendant has given notice of intention to defend.
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