primary tool for restructuring remains the scheme of arrangement, which is a form of statutory contract that is very flexible in its application and allows a majority to bind a dissenting minority, providing that requisite majorities in number and value support the scheme at class meetings and the court adjudicates the scheme to be fair. To successfully challenge a scheme of arrangement, the two main strategies for dissenters are building a blocking position to vote down the scheme of arrangement at the class meetings or, failing that, challenging the scheme of arrangement on grounds of fairness. A recent development which differentiates Cayman as a restructuring jurisdiction is the introduction of the Restructuring Officer regime. Formerly, it was necessary for a company (or a so-called “friendly creditor”) to petition for the liquidation of the company in order for the company to apply to appoint provisional liquidators on a “light-touch” basis so as to invoke the statutory moratorium on claims while the company proposed a compromise or arrangement to its creditors. While this was a creative application of existing statutory provisions, it had the downside that a winding-up petition must first be presented, and thereafter the company was under the control of provisional liquidators (however “light-touch”) and by convention would add the words “in provisional liquidation” after its name. This taint of insolvency discouraged some companies from using the process to the ultimate detriment of their stakeholders, but the new Restructuring Officer regime does not require a winding-up petition to be presented or the appointment of provisional liquidators, so it is a helpful evolution of the practice. For clients looking to protect their investments, what proactive measures can they take in light of current insolvency and restructuring trends? Investors should be wary of any attempt to vary or limit their recourse in the event of insolvency. Non-petition clauses have become very common and will be upheld by the Grand Court. Articles of association and other constitutional documents might also include other restrictions, such as onerous limitation periods, indemnities for directors and officers, and other restrictions that may make recoveries difficult in the event of economic failure. WWW.LAWYER-MONTHLY.COM 53 hope to maximise their return in the shortest possible time. In a restructuring case, the objective tends to be to stabilise the company so that it can continue as a going concern and return greater value over time. Stakeholders in a restructuring case might typically expect to be offered shares in exchange for debt, or for notes to be extended and amended. A liquidation of an insolvent company usually involves identifying that the subject company has no viable future as a going concern, and the objective becomes to maximise the return by realising assets as advantageously as possible and looking to other sources of potential recovery, which would generally involve litigation. Since the two strategies are generally mutually exclusive, it is important to identify the difference as early as possible and then be inventive and flexible about value-creating solutions. How does litigation related to investment fund restructuring differ in the Cayman Islands compared to other jurisdictions? Restructuring in the Cayman Islands has its roots firmly in English law, and the About Mark Mark is a partner in the Litigation, Insolvency & Restructuring Group, specialising in insolvency, restructuring, and investment fund litigation. He represents clients, including liquidators, creditors, shareholders, and directors, in Cayman Islands Courts on a wide range of pre- and post-liquidation disputes, primarily focusing on distressed investment funds. An accredited mediator, Mark frequently publishes articles and speaks at seminars on insolvency and restructuring topics. He also serves as a delegate to the UNICTRAL Working Group V.
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