“Brothers in Arms”: How Certain Companies in Dire Straits can Implement Restructurings with Cayman Islands Assistance

The Cayman Islands has long established itself as one of the leading offshore financial centres by offering an internationally recognised corporate and financial services regime, a robust regulatory framework that is in line with international standards and flexible restructuring options by which to implement cross-border restructurings. With a common law legal system based on English law (with ultimate recourse to the Judicial Committee of the Privy Council in the United Kingdom) thereby providing certainty and predictability, a dedicated financial services division of the Grand Court of the Cayman Islands (the “Grand Court”) and an experienced network of judges, practitioners and advisors in the insolvency and restructuring sector, the jurisdiction has a proven track record for delivering solutions to complex situations in order to achieve successful corporate restructurings.

The unprecedented financial volatility and operational uncertainty brought about by the COVID-19 pandemic has forced many companies to consider a range of restructuring options in a variety of jurisdictions, either on a proactive basis or as a reaction to creditor pressure. Where it is not possible to achieve a restructuring with the unanimous consent of a company’s creditor base, companies are required to carefully consider the most suitable restructuring regime and jurisdiction that will best serve their objectives and those of their stakeholders.

Given the flexibility of the Cayman Islands restructuring regime and the prevalence of Cayman Islands incorporated entities in corporate structures, there has been an increase in the number of cross-border restructurings involving the use of Cayman Islands incorporated entities as a restructuring vehicle.

The deployment of the provisional liquidation regime includes instances where there is an existing Cayman Islands incorporated entity in the structure (such as, an investment holding company and/or debt issuer) or where one is purposely inserted into the group structure in order to make use of the restructuring options that the Cayman Islands has on offer to facilitate a cross-border restructuring.

 

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Originally published in the International Insolvency & Restructuring Report 2021/22