English court approves payment for votes in favour of a financial reorganisation

In the past 10 years, 105,290 companies have been registered in the Cayman Islands. However, in that same period, the total number of companies on the Cayman Islands Corporate Register has only increased from 64,495 to 92,964. The mismatch in these figures indicates that there must be a significant number of group restructurings, reorganisations or liquidations taking place on an annual basis. While some of these will be involuntary, many will take place with the consent and consideration of stakeholders, creditors and shareholders alike.

In the USA, the practice of offering payments in return for affirmative votes to a proposed financial reorganisation has become an accepted tool for securing that the restructuring goes ahead. There are no reported instances of this practice having been judicially considered in the Cayman Islands. However, the English High Court recently approved the use of payments for votes in a reorganisation of a Cayman Islands company, although not binding here, the decision could provide persuasive authority that such methods may be approved by the Cayman Court in due course…

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