Transfers of shares of Cayman companies in liquidation
Over the past two or three years, we have seen an increasing number of cases where a client holds and wishes to sell or transfer shares in a Cayman Islands company that is in liquidation or is seeking to purchase shares in such a company from another party. In those circumstances, the transfer of the shares would be void absent the validation of the Grand Court of the Cayman Islands, as a result of section 99 of the Companies Law (2013 Revision). Section 99 is in the following terms:
‘99. When a winding-up order has been made, any disposition of the company’s property and any transfer of shares or alteration in the status of the company’s members made after the commencement of the winding up is, unless the court otherwise orders, void.’
Traditionally, applications for the court’s validation of the transfer of shares were made by issuing a summons within the liquidation proceedings, but the applications were ordinarily dealt with by the court administratively, without the need to attend a court hearing, following the decision of the Honourable Chief Justice in In re Bayou Offshore Master Fund Ltd [2007 CILR 434]. In that case, which concerned the transfer of shares in a Cayman mutual fund that was in liquidation, the Chief Justice stated that ‘in order to save the costs of what are anticipated to be routine applications, any such application may be made in writing and may be considered administratively by a judge’…
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Briefings from Ogier
Decisions over the past 12 months will provide considerable comfort to those concerned about exposure to clawback action.
The High Court of England and Wales may refuse to exercise its discretion to wind up companies incorporated abroad where there would be little likelihood of the petitioners deriving benefit from the winding-up.