Category Archives: Client Advisories

The Cayman Islands’ Court of Appeal has overturned the first instance Weavering decision, which had held a hedge fund’s former non-executive directors liable for $111m on the basis they had acted with “wilful neglect and default” in failing to spot that the fund’s main “assets” were fictitious swap agreements purportedly worth $637 million, but which in fact were made with a related counterparty which had no assets to satisfy its liabilities under those agreements.

Ross McDonough, Mark Goodman and Rebecca Lloyd shed light on the recent decision of the Chief Justice concerning a ‘clawback’ claim by liquidators of an insolvent fund. The judge ruled that redeemed shareholders were allowed to keep their money despite the fund having been cash flow insolvent at the time they were paid.

Brian Child, Guy Manning and Ross McDonough summarise the recent decisions of the Privy Council in the Saad and Singularis cases and propose practical solutions to the issues currently existing for liquidators seeking information in relation to companies in liquidation in the Cayman Islands.

FATCA is a USA and UK tax initiative with significant obligations imposed on Cayman Islands funds. All Cayman Islands funds will need to consider whether such are required to register under FATCA and undergo regular reporting. The following briefing paper provides a wide overview and guidance on registration and on-going reporting requirements.

The Cayman Islands Government announced, on 21 March 2014, its intention to introduce a regime for the registration and licensing of directors appointed to the boards of the following types of entities, known as “Covered Entities”: mutual funds regulated under the Mutual Funds Law (Revised) (“Regulated Mutual Funds”); and companies to which paragraphs 1 and 4 of Schedule 4 of the Securities and Investments Business Law (Revised) apply (“Excluded Persons”), usually entities providing investment management or investment advisory services.

The Law was brought into force on 4 June 2014 along with the Directors Registration and Licensing (Registration and Licensing) Regulations, 2014 and is now in full force and effect in the Cayman Islands. This Law denotes the first time that directors of Regulated Mutual Funds and Excluded Persons have been regulated directly in the Cayman Islands and it gives to the Cayman Islands Monetary Authority the power to approve or deny a registration or a licence.

The new Contracts (Rights of Third Parties) Law (“Law”) was enacted on 21 May 2014 and is now in full force and effect in the Cayman Islands.

This briefing paper explains schemes of arrangement under Cayman Islands law. Under sections 86 and 87 of the Companies Law (2013 Revision) the Grand Court may sanction a compromise or arrangement between a company and its creditors or members or any class of them.

The new Exempted Limited Partnership Law, 2014 (the new “ELP Law”), which repeals and replaces the current law, is shortly expected to come into force in the Cayman Islands. The ELP Law recognises developments in commercial practice, clarifies certain matters in order to ensure consistency of advice and allows for greater contractual flexibility to accommodate developing trends in the formation, regulation and operation of exempted limited partnerships.

In a recent judgment, the Cayman Islands Court of Appeal has confirmed the scope of the jurisdiction of the Grand Court, under sections 241 and 242 of the Companies Law (2013 Revision) (the “Law”), to assist foreign liquidators and trustees of foreign companies and other entities in foreign bankruptcy proceedings in their jurisdiction of incorporation by reversing pre-liquidation transactions under transaction avoidance legislation.

In an unreported judgment in ICP Strategic Credit Income Master Fund Ltd. delivered on 4 April 2014, Mr Justice Jones has helpfully confirmed and clarified Cayman Islands law and procedure in respect of applications by liquidators for approval to (i) bring proceedings in the name of the company, (ii) enter into litigation funding agreements with litigation funders, and (iii) enter into contingency fee agreements with the liquidators’ lawyers.