Cayman Islands company law

In exception circumstances the courts are prepared to "pierce the corporate veil" and treat the assets of the company as belonging to the members (or, conversely, treat the company's obligations as the obligations of the members), but the circumstances in which this will be done are rare and exceptional.

[20] Any amendment to the memorandum or articles normally becomes effective upon the passing of the special resolution.

This is much more closely akin to a partnership agreement than to the memorandum and articles of association of a company.

[22] The business and affairs of a Cayman Islands company are usually managed by its board of directors.

Directors owe strict duties of good faith to exercise their powers for a proper purpose and in the best interests of the company.

Resolutions may be passed by the members formally or informally pursuant to the Duomatic principle.

Accordingly, minority shareholders who are prejudiced in this have to rely upon the common law exceptions to the rule set in Foss v Harbottle,[26] or seek a winding-up of the company on just and equitable grounds.

The rights of other stakeholders, such as employees, customers and wider society are given comparatively little protection.

This reflects the offshore nature of most Cayman Islands companies, and the different social and economic environments in which they operate.

Shareholder voting in the Cayman Islands is still predicated by the normal basis of majority-control.

Companies are not required to file financing statements in the Cayman Islands when borrowing money.

[33] There are no restrictions prohibiting Cayman Islands companies from giving financial assistance for the acquisition of their own shares, and no requirement to go through a "whitewash" procedure.

[41] Demonstrating to the Court that a company is balance sheet insolvent is normally sufficient.

[44] The purpose of the committee is to provide guidance and input on the creditors’ wishes as a body to the liquidator.

[48] Winding-up is deemed to commence at the presentation of the petition (i.e. upon the making of an order, it "relates back").

[50] Cayman Islands law only provides for a very small class of preferential creditors, and these are rarely commercially significant in insolvent liquidations.

Nor is the right to set-off lost by virtue of the fact that the creditor had notice of the company’s insolvency at the time of extending credit to it.

[54] However there is no separate avoidance regime for voidable floating charges or for extortionate credit transactions.

CIMA’s ambit extends to companies (and any other entities) which are engaged in regulated business.