New Insolvency Rules in the Cayman Islands

By Tim Le Cornu and Mathew Clingerman
Cayman Financial Review, July 2009

This is the second article in a two-part series dedicated to discussing the recent reforms impacting the Cayman Islands’ insolvency regime as a result of the Companies Amendment Law 2007, the Companies Winding Up Rules 2008, the Insolvency Practitioners Regulations 2008 and the Foreign Bankruptcy Proceedings (International Co-operation) Rules 2008 coming into effect on 1 March 2009.

Powers and duties of official liquidators 

An official liquidator is an officer of the Court whose function is to collect, realise, maintain, manage, and distribute the company’s assets. In order to carry out his duties and functions, an official liquidator relies on specific powers granted to him. Section 110 now makes a distinction about powers that fall automatically to an official liquidator in contrast to other powers that may only be exercised with the sanction of the Grand Court. Powers that may be exercised automatically include, inter alia, to:

• take possession and collect the company’s property, including taking any necessary proceedings;
• promote a scheme of arrangement;
• do all acts and execute deeds, receipts and other documents on behalf of the company.

Powers that may only be exercised with sanction include, inter alia, to:

• initiate/defend any action or legal proceeding on behalf of the company;
• carry on the business of the company;
• dispose/sell property of the company to any related party;
• pay any class of creditors in full;
• engage staff (whether or not as employees of the company) and attorneys to assist the official liquidator

Traditionally, many of the powers available only with sanction have formed part of the draft order submitted at the winding up hearing and have become powers of the official liquidator from the date of appointment. Given an official liquidators’ need for some of these powers from the outset, such as the ability to retain attorneys who provide necessary legal support and advice to a liquidator in carrying out his duties, we expect that this practice will continue.

Official liquidators have always enjoyed the ability to apply to the Grand Court for examination of various parties in relation to the affairs of a company in liquidation. Section 103 provides official liquidators with the ability to apply to the Grand Court for examination, either by way of sworn affidavit in response to written interrogato

ries and/or by oral examination, of: