Voluntary liquidation or Company Strike-Off?

When things come to an end for a Cayman Islands company is it better to aim for voluntary liquidation or a strike-off? Here’s the answer. When a Cayman Islands company comes to the end of its life, there are basically two options – voluntary liquidation or a company strike-off. Which route you choose depends on the state of the business and its current finances.

Both options are considerably easier to negotiate if the business has no assets or liabilities.

The difference between the two methods of closing down a business boils down to whether or not the company has existing agreements with investors, customers or suppliers and if it has conducted any trade since its incorporation.

If the answer is yes, the common way to wind up the company is through a shareholders’ voluntary liquidation. If the answer is no, the more streamlined and economical legal approach is a strike-off, which is faster and cheaper.

In the case of voluntary liquidation in the Cayman Islands, the company directors ask the shareholders for a special resolution to approve the appointment of the liquidator. All directors must provide a declaration of solvency that the company will pay its debts and any interest on them within 12 months from the commencement of the liquidation.

A director making a declaration of solvency while not having reasonable grounds for believing the company can pay its debts could end up in prison for two years.

In the case of a Cayman Islands company strike off the Registrar of Companies, at the request of the company directors, can simply strike the company from the registrar where it has reasonable cause to believe the company is not operational or conducting any business. This is the approach to take if the company has never traded and has no assets or liabilities. Click here to read more: https://hcsoffshore.mystrikingly.com/blog/voluntary-liquidation-or-company-strike-off