New Corporate Restructuring Process: The Restructuring Officer Regime

A new corporate restructuring regime in the Cayman Islands will be available to certain debtors in financial distress pursuant to the Companies (Amendment) Bill, 2021.

The Bill will amend Part V of the Companies Act (Revised) of the Cayman Islands. It is expected that these amendments will come into force in short order. The Cayman Islands, to date, has not had a formal corporate restructuring process akin to the United Kingdom ‘administration’ process and the United States ‘Chapter 11 bankruptcy’ process. The current position in the Cayman Islands is that a restructuring process can only be taken by presenting a winding up process to the Grand Court in the Cayman Islands (where the Court may give directions to permit the restructuring to occur).

The amendments will introduce the concept of a ‘restructuring officer’, who must be a qualified insolvency practitioner and an officer of the Court. The restructuring officer’s role will be to supervise the company’s restructuring process and his/her powers will be flexible as conferred by, and subject to, the Court’s discretion. The directors of a company may present the application to Court to appoint the restructuring officer on the basis that the company is or is likely to become unable to pay its debts and intends to present a compromise or arrangement to its creditors or classes of creditors either pursuant to the Companies Act (Revised), the law of a foreign country, or by way of a consensual restructuring. The effect of filing the application is an automatic global moratorium which will prevent any petitions to wind up the company without leave of the Court including all foreign proceedings and any proceedings to wind up the company. Despite this, secured creditors will still nonetheless be able to enforce their security against the company without approval by the Court or restructuring officer.

The new regime will provide a streamlined and commercially sensible approach to restructurings in the Cayman Islands. Cayman Islands mutual funds and private funds may take advantage of the new regime (once in force) which will provide a formal corporate restructuring process without the need of having to go through a formal winding up process in order to restructure its affairs. The new regime will enhance the Cayman Islands’ reputation as a leading jurisdiction for international complex corporate restructurings.