CIFSA Welcomes Revisions To Cayman Insolvency Regime

by Amanda Banks, for LawAndTax-News.com, London

17 October 2007

Soon to be introduced changes to the insolvency legislation in the Cayman Islands, which include the licensing of practitioners and measures to help with cross-border insolvencies, have been welcomed by the Cayman Islands Financial Services Association (CIFSA).

The changes will be implemented within the next six months to a year, while a new Insolvency Rules Committee develops a framework of rules and regulations to give practical effect to the changes. The industry, however, has been quick to outline how these changes improve an already successful and respected formula.

"The Cayman Islands is well known and respected for the strength of its insolvency framework, providing commercial certainty along with transparency and protection for the rights and needs of both investors and creditors," observed David Roberts, a director of CIFSA. "These changes will only serve to increase Cayman's reputation as a modern and effective financial centre, ideally suited to working through the complexities of major cross-border insolvencies."

In addition to the licensing requirement, the new framework provides for disciplinary action against practitioners that act improperly. It also gives foreign receivers and liquidators the power to recover assets in the Cayman Islands, in line with the legislation in the United Kingdom and the United States which recognises Cayman liquidators.

"Foreign receivers and liquidators will receive reciprocal treatment in the Cayman Islands," commented CIFSA director, Bryan Hunter. "There can be no doubt that our insolvency regime is equally friendly to investors as it is to creditors, with no special favours for the management of companies that are liquidated in the Cayman Islands."

The company law revisions were a result of widespread consultation with the local legal and accountancy professions. They come against the backdrop of increased global attention on the liquidation regime, after a US bankruptcy judge refused to provide Chapter 15 protection to the Cayman liquidation of two failed Bear Stearns hedge funds.

Cayman Islands liquidators will also gain the power, where it is appropriate, to administer foreign companies which are based and conducting business in the Islands, while the revisions will formalise and clarify a number of other practices, such as fee determination.

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