Rules and regulations governing insolvency practice in the Caribbean under review
By Kenneth Krys
Published in Corporate International, August 2010
The number of insolvencies occurring in the Caribbean has increased in the past two years, but not all cases are a result of the economic downturn. Investors and stakeholders have increased their due diligence and monitoring and this has meant accountability within companies has increased and in some cases has led to the revelation of concealed frauds or mismanagement.
New insolvency legislation was introduced in the Cayman Islands in 2009 to comply with international standards. The BVI has recently enacted its Securities and Investments Act 2010 and are currently making changes to its Companies Act. The Bahamas is undertaking a review of its current rules and regulations governing insolvency practice. In the wake of so many financial institution and hedge fund failures, some regulators are seeking to enact legislation that would require hedge
“We have found some of the alternative methods of fundraising or improving liquidity, particularly as it applies to hedge funds, include: the suspension of redemptions, implementing “gate” provisions or transferring bad assets to “side pockets” or separate corporate vehicles.”
funds to provide increased levels of transparency. Regulators both onshore and offshore jurisdictions are considering the impact this may have on their industry and mandates.
Krys & Associates is an independent and dedicated firm that offers corporate recovery, insolvency, forensic accounting and business advisory services with offices in the Cayman Islands, British Virgin Islands, Bahamas and Bermuda. The Firm has over 40 professionals with experience in insolvency and financial services in the Caribbean, Americas, Asia, Europe and Africa. The firm is renowned for being innovative, creative, energetic, dedicated and results-driven. Special areas of expertise include court-appointed liquidations and multi-jurisdictional litigation that arise from these engagements.
Firm founder Kenneth Krys discussed some of the critical issues that need to be addressed when assessing a distressed business and implementing a turnaround. He said that professionals must pinpoint what is causing the business to be distressed. Where the business is suffering from lack of liquidity or poor management, it may be possible to find means to enhance profitability; improve performance and minimise the risk of loss. Kenneth commented further:
“We propose remedies in the form of improved internal controls, budgetary accountability, integrity tests, sale or transfer of redundant or poor assets, and fraud prevention training to assist businesses. We will ensure the company is up-to-date with assessing its risks and areas of exposure, whether regulatory, financial, or environmental, i.e. affecting business continuity.”
There are a number of proceedings and/or mechanisms to facilitate the rehabilitation of a distressed company. One of the primary proceedings is the appointment of a provisional liquidator. Another mechanism is to petition the Court for an Order enabling the company to pursue a compromise or an arrangement with its creditors or members, often called a “scheme of arrangement” or a “scheme”. A scheme is a flexible, timely and cost effective form of corporate restructuring, which may be put forward in relation to a single company or a group of companies. Kenneth highlights that liquidation proceedings should be avoided if possible and left as a last resort for a business when all other options fail.