Lawyer Monthly - December 2024

How does Cayman Islands law address the unique complexities of cross-border insolvency, and what benefits does this provide to international clients? The Cayman Islands has not adopted the UNCITRAL Model Law on CrossBorder Insolvency but has developed its own mechanisms for the management of cross-border cases. Foreignappointed officeholders over a Cayman company are therefore not able to seek recognition of their appointment in the Cayman Islands through the mechanisms included in the UNCITRAL Model Law. Instead, a foreign-appointed officeholder must seek an appointment in Cayman jointly with a locally resident, licensed insolvency practitioner. Appointees of a foreign company with interests in the Cayman Islands can seek recognition of their appointment pursuant to section 241 of the Companies Act (2023 Revision). The Grand Court also applies common law principles of comity in providing assistance to foreign-appointed liquidators short of recognition. Order 21 of the Companies Windingup Rules 2018 imposes a positive duty upon a Cayman liquidator to consider entering into an international protocol with any foreign counterpart, aimed at harmonising the management of the liquidation to avoid wasteful and expensive duplication of effort. Between the courts themselves, the Grand Court has previously recognised a positive duty to assist the foreign main insolvency or restructuring proceeding, and in Practice Direction 1 of 2018, approved the American Law Institute/ International Insolvency Institute (“ALI/ III”) and the Judicial Insolvency Network (“JIN”) Guidelines for court-to-court communications as being suitable for use in cross-border insolvency and restructuring cases. In what ways have recent economic shifts impacted the insolvency and restructuring landscape for investment funds in the Cayman Islands? The Cayman Islands occupies a unique position as an insolvency and restructuring jurisdiction in that most of the well-over 100,000 locally incorporated companies conduct business activities mostly or exclusively outside of the Cayman Islands. As a result, Cayman companies have operations and interests which span the globe and cover every industry sector, making the Cayman Islands less susceptible to localised trends or economic shifts. Global macro-economic or geopolitical events, such as the Global Financial Crisis or the COVID-19 pandemic, had a pronounced effect on the local insolvency and restructuring market, but for the most part, the number of insolvency and restructuring filings year-on-year shows a steady upward trend. Jurisdictionally, there has been a significant increase over the past decade in disputes and insolvency cases emanating from the PRC. The Russian invasion of Ukraine has resulted in a dramatic reduction in Russian-exposed disputes and insolvency cases due to economic sanctions. In terms of industry sectors, the mainstream adoption of cryptocurrency as an investment instrument and the increased interest of institutional investors in digital assets has seen significant growth in crypto and fintech-related investment funds. As a consequence, the Cayman Islands has seen its fair share of the global rise in crypto and fintech-related disputes and insolvencies. The continued evolution of the digital assets landscape suggests that this trend is set to continue. What are the primary legal considerations for clients involved in restructuring or insolvency cases in the Cayman Islands, and how can they navigate these effectively? The primary considerations for stakeholders in restructuring or insolvency cases tend to be essentially the same, as in both cases stakeholders 52 LAWYER MONTHLY DECEMBER 2024 The Grand Court has become adept at identifying cases where there is a realistic prospect of a restructuring solution which provides a greater return to creditors.

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