Insolvency Developments in the Cayman Islands
By Jonathan Murphy
Published in Corporate International (May 2011)
For years, Caribbean jurisdictions have used the UK Insolvency Act 1986 as the basis for insolvency matters, with appropriate amendments for local conditions. In the Cayman Islands, the Companies Winding Up Rules (2010) and the Companies Law 2010 govern the manner in which companies are liquidated. The law has been updated in recent years in both the Cayman and British Virgin Islands (BVI) – in order to reflect evolving international standards.
KRyS Global provides solutions to complex cross-border issues in the areas of Corporate Recovery, Insolvency, Forensic Accounting and Business Advisory Services. The firm is home to more than 40 professionals working in offices in four jurisdictions – the Cayman Islands, the British Virgin Islands, the Bahamas and Bermuda.
According to Jonathan Murphy, manager at KRyS Global, being an independent venture has enabled the firm to provide clients with a more personalised service without issues of conflict-of-interest arising – as may be the case with larger international firms. In addition, KRyS Global is involved in some of the largest, most complex international and cross-border assignments in the Caribbean, and obtains work from lawyers, regulators, fund managers, administrators and insolvency and professional firms in other jurisdictions.
Some of the firm’s larger engagements include SPhinX Group, Fairfield Sentry, and Sextant Funds. All of these engagements involve elements of fraud, cross-border litigation and highly complex issues requiring specialised strategies to recover assets for the benefit of creditors.
“Fairfield Sentry is a BVI registered company and was the largest feeder fund into Madoff Securities,” said Mr. Murphy. “KRyS Global is maximising creditor recoveries by pursuing a number of third party claims and the return of redemption proceeds distributed globally to investors.”
When asked what specific legal complexities are associated with matters of insolvency and restructuring in cross-border issues, Mr. Murphy said that given the cross-border nature of many offshore appointments, insolvency practitioners often have to seek recognition of their appointment in onshore jurisdictions to give them standing to pursue third-party claims by litigation.
“Obtaining recognition has allowed us to realise and maximise recoveries, and expand the scope of claims and remedies being pursued whilst protecting the estate,” he noted. “KRyS Global has developed a network of professionals worldwide to assist in devising innovative and efficient solutions to such complex cases.”
Today, the firm’s work primarily involves hedge fund structures with an increasing number of appointments over companies with Asian investments or subsidiaries.
Mr. Murphy concluded: “Overall, we have seen increased activity since the financial crisis, as the recession caused investors to conduct additional due diligence on their investments and client relationships. In addition, early in 2011 the Cayman Islands enacted a number of amendments to the Companies Law. These revisions include: flexibility for companies to hold their own shares, refining merger and consolidation provisions to allow more flexibility, as well as modernising document execution provisions. The revisions are an example of the Cayman Islands’ ongoing commitment to review the law – in order to keep Cayman at the forefront of the leading international financial centres.”