Liquidating a Company in the Cayman Islands

As an offshore financial centre, the Cayman Islands has more resident companies than citizens. Accordingly, Cayman corporate services specialists spend a large amount of time dealing with company liquidations and reorganization.

As one of the largest financial services centres in the global economy, the Cayman Islands is the domicile of choice for hedge funds and various trusts. This continuing growth is accompanied by an increasing demand for corporate liquidation services in the Cayman Islands.

A Cayman Islands company can be voluntarily dissolved by appointing a liquidator or it can be dissolved if the company is struck off by the Registrar of Companies as a result of an application. Any person (including a former director of the company) may act as liquidator in a solvent voluntary winding up.

Where the company has been active and has substantial assets and liabilities, normal practice is for the company to agree to be liquidated, agree on a fee with the liquidator, and often provide the liquidators with an indemnity. The liquidator’s duty is to collect all the assets of the company, liquidate them and pay the claims of the company’s creditors pari passu (impartially). At the conclusion of the winding-up, the company is dissolved.

The company must be solvent for the 12 months following the director’s resolution for a voluntary liquidation to proceed. To voluntarily liquidate solvent companies in the Cayman Islands involves the following procedures:

The Directors commence voluntary winding-up by holding an Extraordinary General Meeting of shareholders to pass a Special Resolution that the company be placed in voluntary liquidation. Shareholders then pass the special resolution and a liquidator is appointed.

Notice of the special resolution is published in the Cayman Islands Gazette. The Liquidator then proceeds to collect the assets and discharge the liabilities of the company. As soon as the affairs of the company are fully wound up, the liquidator advertises the time, place and object of the final general meeting of the company, to be held not less than one month after the notice is published.

Statutory insolvency provisions requires the liquidator to report back to the company’s shareholders periodically through the liquidation process to keep them informed of the collection and realisation of assets and the settlement of liabilities.

If the company has no assets or liabilities and the date of the final meeting has already been set, the liquidator may proceed to hold the final meeting.

The liquidation itself is concluded after the liquidator has provided the final report to shareholders. At the conclusion of the final meeting, the liquidator must file a notice confirming that the meeting has been held and the appropriate resolutions approved to conclude liquidation.

The company ceases to carry on its business from the date of commencement of winding up, except as may be required as part of the winding-up. All the company’s corporate powers shall continue until its affairs are wound up.

An alternative to liquidation is striking off. The strike-off method is best suited to a company that is inactive with no assets, liabilities or creditors and does not require the use of a liquidator. Striking off is a quick and economical way of striking off solvent companies as it does not incur the costs of the liquidation process.

On the request of the company, the Registrar has the power to strike off a company where the Registrar has reasonable cause to believe that the company is not carrying on business or is not in operation. The Registrar will require a resolution of the shareholders of the company requesting the striking off and an affidavit of a director confirming that the company has no assets or liabilities.

Following the striking off, the Registrar will immediately publish a notice in the Gazette advertising that the company has been struck off, the date of strike-off and the reasons for the strike off. On striking off, the company is dissolved.

The striking off process does not deal with liabilities to creditors and is not suitable for companies with intricate dealings or valuable assets. In this case, liquidation is the preferred route for dissolving the company.

Where the strike-off method is used to dissolve a company, all the undischarged assets and liabilities of the company will automatically be vested with the Financial Secretary for the benefit of the Cayman Islands.

The above information is not comprehensive and is intended as a general guide only. Contact a Cayman Islands liquidation services specialist for specific advice.

Original Article Source: https://medium.com/@CaymanGuide/liquidating-a-company-in-the-cayman-islands-f4a4f102aeaa