Appointment of inspectors in the Cayman Islands

I. Legislative Scheme

Appointment by the Court

Section 64 of the Companies Act (2025 Revision) provides an extraordinary remedy for aggrieved shareholders, allowing the Court to appoint one or more inspectors to examine into the company’s affairs and to report as directed by the Court, upon the application of members holding not less than one-fifth of the shares.

Power of inspectors

All officers and agents of the company shall have the duty to produce all books and documents in their custody or power for the examination by an inspector.  An inspector also has the power to examine upon oath the officers and agents of the company in relation to its business.

Report of inspectors and its admissibility

The inspectors shall report their opinions to the Court upon the conclusion of the examination, which is not public unless otherwise directed by the Court.  Such a report is admissible in any legal proceedings as evidence of the opinions of the inspectors in relation to any matter contained therein.

Inspection by resolution of the company

A company may also appoint inspectors by special resolution, and inspectors so appointed shall have the same powers and duties as those appointed by the Court, except that they make the report to persons directed by the company’s resolution.

II. Test for Court Appointment

Unlike its English counterpart, the Companies Act does not set out a jurisdictional threshold for the appointment of inspectors, which leaves the question for the Court to fashion the applicable principles.  It should also be noted that inspectorship has historically been rarely used by the shareholders of Cayman companies.

Several cases in recent years tried to summarise a non-exclusive list of principles (particularly per Parker J in Re the Avivo Group, unreported, 30 November 2022), inter alia:

• The appointment of inspectors is a particularly fact-sensitive issue, which will vary depending on the circumstances of the case.
• The appointment of inspectors is a serious step. The Court should balance the competing interests of the parties in exercising its discretion.
• The appointment of inspectors is extraordinary, and is only warranted when it is right and appropriate to do so. The power should be exercised “with caution, and only in cases clearly calling for its application”.
• An order for the appointment of inspectors should only be made on a strong likelihood, well-founded on a solid and substantial basis, of some grave misconduct or mismanagement relating to the management of the company.
• An important consideration is whether the applicant has sought an explanation from the directors and has been denied one and/or whether the directors have concealed facts from the shareholders.
• The power to appoint inspectors should only be exercised where an object or particular outcome is likely to be achieved.
• The Court shall take into account the weight of shareholder support for the application, but this is not a determinative factor.
• The Court should consider whether the applicant has other available remedies.

Conclusion

In practice, the appointment of inspectors under Section 64 of the Companies Act remains a rarely used but powerful remedy for shareholders of Cayman companies. It is designed to address serious concerns about misconduct or mismanagement, and the Court will only exercise this discretion with caution and on a solid evidentiary basis. For shareholders, the key considerations are whether directors have refused to provide explanations or concealed information, whether alternative remedies are available, and whether the appointment is likely to achieve a meaningful outcome. While broad shareholder support can strengthen an application, it is not decisive. Ultimately, inspectorship serves as an extraordinary safeguard, offering shareholders a mechanism to obtain transparency and accountability when other avenues have been exhausted.