JURISDICTIONOFFSHORE UPDATE UPDATES

Walkers (Dubai) LLP, registered with DFSA PO Box 506513, Level 14, Burj Daman, Dubai International Financial Centre, Dubai, UAE Tel : (971) 4 363 7919, (971) 4 363 7926 E: [email protected] • [email protected] By Sophie Kassam and W: www.walkersglobal.com Luke Petith

Restructuring options in the Cayman Islands the Cayman Islands is therefore somewhat of a misnomer since the object of the proceedings is to typically rescue the company as a going concern question that we are regularly asked by rather than to liquidate and dissolve the company. general counsel is what options are availa- “In a “soft touch” In a “soft touch” provisional liquidation, the ble where a Cayman Islands holding company is provisional liquidation, provisional liquidators would typically work along- facing an imminent debt crisis. In such circum- side the existing directors to develop and propose stances, its board of directors must have regard to the provisional liquidators a restructuring without completely displacing the creditors’ interests as a whole when discharging would typically work directors’ powers. Ultimately, the order appoint- their fiduciary duties and should ideally be engag- alongside the existing ing the provisional liquidators will clearly set out ing with the company’s creditors in order to try which powers the provisional liquidators are able and agree upon a consensual restructuring solu- directors to develop and to exercise (often limited to oversight of the pro- tion. However, such a consensual out-of-court propose a restructuring gress of the restructuring and reporting to the process would typically require unanimous sup- without completely Court and the company’s creditors) and which port (or acquiescence) from all of the company’s displacing the directors’ powers will be retained by the directors. The creditors and therefore the board may wish to Court is generally flexible in allowing sufficient time consider alternative options to mitigate the risk powers” for the provisional liquidators to consider whether that a disgruntled creditor may seek to disrupt any a restructuring is capable of being agreed and restructuring process by commencing winding up petition may be presented by the company, any implemented. proceedings against the company. creditor, any contributory or the Cayman Islands It is proposed that a new Court supervised One option would be for the company to Monetary Authority (in certain circumstances). restructuring moratorium regime will be in force petition the Cayman Islands courts (the “Court”) However, an application seeking the appointment in the Cayman Islands by the end of 2018. The for a provisional liquidator to be appointed on a of “soft touch” provisional liquidators to effect a process would allow a company to petition for the “soft touch” basis in order to implement the pro- restructuring may only be made by the company appointment of restructuring officers to obtain a posed restructuring and to protect the company itself. While the presentation of a winding up peti- stand-alone restructuring moratorium (separate from creditor enforcement action or proceedings tion is required to access the provisional liquida- from the winding up regime) thereby offering being commenced or continued without the tion regime, provisional liquidation does not companies with more avenues by which to ben- leave of the Court. The moratorium that is trig- necessarily result in the formal winding up of the efit from an automatic stay on claims. gered on the appointment of provisional liquida- debtor company. Rather, where provisional liqui- In the meantime, “soft touch” provisional liq- tors provides breathing space for a company to dation is used to support a successful financial uidation is an extremely helpful tool for any negotiate with its stakeholders and implement a restructuring where the debtor company survives, Cayman Islands company that is considering its restructuring without the risk of the process being the end result is usually that the winding up peti- options in the face of a possible default, and pro- derailed by the actions of one or more dissenting tion is dismissed and the newly restructured vides a formal Court-led process, and statutory creditors. company continues as a going concern. Provisional protection, in order to effectively restructure its Under Cayman Islands law, a winding up liquidation when used in a restructuring context in debt and continue as a going concern.

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