Navigating Access to Company Information: A Guide for Shareholders and Creditors of Cayman Incorporated Companies

Corporate Documents

As a starting point, pursuant to Section 29 of the Cayman Islands Companies Act (CICA), members are entitled to a copy of the Company’s memorandum and articles of association (Articles).

Generally, under Cayman law a company is required to maintain at its registered office a register of directors, alternate directors and officers which is not available for inspection by the public, subject to Articles, inspection may only be made by a director or with the authorisation of its board. A list of current directors (and alternative directors) on the other hand, is available for physical inspection by the public at the office of the Cayman Registrar of Companies, on payment of a nominal fee.[1]

The register of members is also, subject to the articles, not available to its members for inspection, save for exempted companies that hold licences to carry on business locally in the Cayman Islands.[2] A Cayman company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time.  There is no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands.  The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection.

Therefore, as set out above, corporate documents available to creditors and shareholders (subject to Articles) under statute remain limited.

Appointment of Inspector under section 64 CICA

Section 64 CICA provides:

“The Court may appoint one or more than one competent inspectors to examine into the affairs of any company and to report thereon in such manner as the Court may direct — ……. (b) in the case of any other company having a capital divided into shares, upon application of members holding not less than one-fifth of the shares of the company for the time being issued….”

Section 65 CICA further sets out the power of inspector:

“It shall be the duty of all officers and agents of the company to produce for examination by an inspector all books and documents in their custody or power; any inspector may examine upon oath the officers and agents of the company in relation to its business, and may administer such oath accordingly…”

Before appointing an inspector, the Court needs to understand what is to be investigated (and examined) and why the applicant needs the information or opinions sought and to be satisfied that the applicant is properly entitled qua member to request that an investigation (examination) of the relevant subject matter be conducted by inspectors (in light of his/her rights and the conduct of the company). The applicant must show that he/she has a good reason for needing and a proper justification for obtaining the information and having an investigation (examination) conducted and will benefit qua shareholder thereby, and also that the appointment of inspectors is an appropriate way to obtain the information or assessment of the company’s affairs sought. It may be that the applicant can show that the company is in breach of an obligation to provide information or documents to the applicant or that there is evidence or a reasonable allegation of a breach of duty by the company’s directors or the commission of some other legal wrong.[3]

In addition, the Court will also consider the cost and other implications of an appointment when exercising its discretion and will be unlikely to exercise the power to appoint if some alternative, less expensive and intrusive method for doing so is available. ​​

The relevant considerations for the Court to exercise this jurisdiction is helpfully set out by the Grand Court in Re Jutal Offshore Oil Services (Unreported 30 March 2023) at [7], referring to [62] of Re Avivo Group (Unreported 16 December 2022):

1. The appointment of inspectors is very fact sensitive.

2. The Court should balance the competing interests of the parties, in that the applicant must show good reasons for seeking this remedy as it will have serious reputational implications to the company.

3. The power should be exercised with caution and only in cases where it is right and appropriate to do so.

4. A shareholder cannot appoint an inspector as a matter of right, there must be a compelling reason and legitimate cause for complaint.

5. 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 which related to the management of the company, a mere “feeling” that something is wrong or that there might be something that is dishonest or improper will not suffice.

6. An important consideration is whether the applicant has sought an explanation from the directors and have been denied one and/or whether the directors have concealed facts from the shareholders.

7. The power should only be exercised where some object is likely to be achieved, for example the winding up or where steps may be taken to recover damages or property for the company.

8. The application is genuine, not made for a collateral or improper purpose, and that the remedy of appointing inspectors is appropriate and proportionate in all the circumstances.

9. While a not determinative factor, the Court should take into the account of shareholder support for the application.

10. Whether the applicant has other less expensive and intrusive remedies available.

The appointment of inspectors is a useful tool for shareholders to gather information of Cayman companies and it can be seen as a less invasive option compared to a just and equitable winding up petition and/or derivative action on behalf of the company against wrongdoers. Nonetheless, this remedy remains an extraordinary one which the Court will not take lightly and applicants must have strong and cogent evidence in order to satisfy the requirements set out above.

Norwich Pharmacal Order

A Norwich Pharmacal order (NPO) originates from the decision in Norwich Pharmacal v Customs & Excise[4] and requires a respondent to disclose certain documents or information to the applicant. Orders are commonly used to identify the proper defendant to an action or to obtain information to plead a claim.

The relevant requirements for the grant of an NPO are set out by the Grand Court of Cayman in Northeast Securities Co Ltd v Tricor Services (Cayman Islands) Limited and Another[5] (NE Securities):

1. A wrong must have been carried out, or arguably carried out, by an ultimate wrongdoer – and in order to establish wrongdoing, “it is necessary that the applicant should show an arguable case of the existence of some remedy—by action or lawsuit, or, in the words of the Ramilos gloss, “other legitimate redress”—available to him. That is because a NPO will not be made without purpose; and if the applicant cannot show that the ultimate wrongdoing of which he complains is of such a nature as to give him a cause of action or some other right of redress the provision of the information he seeks serves no legitimate purpose.”[6]

2. There must be a necessity to enable action to be brought against the ultimate wrongdoer – the question of whether or not the NPO is “necessary” in general terms “must properly be considered by reference to the predominant purpose for which it is sought”.[7] Further, the fundamental principle as to what necessity means is that there must be no other “straightforward or available, or any, means of finding out” information that is central to the applicant’s ability to obtain relief for proven or suspected wrongdoing.[8]

3. The person against whom the order is sought must: (a) be mixed up in so as to have facilitated the wrongdoing; and (b) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued – although this requirement of involvement or participation on the part of the party from whom discovery is sought is not a stringent requirement, it is still a significant requirement.[9]

Obtaining an NPO can be a very effective tool in obtaining crucial information held in the Cayman Islands that is needed to pursue a claim against the ultimate wrongdoer anywhere in the world, which the applicant would struggle to obtain by other means.

Liquidation

In cases where the debtor company’s financial status is uncertain, it may be more appropriate to opt for liquidation as liquidators would have broad powers to look into the affairs of the company, secure, realize and distribute the debtor company’s assets. That being said, liquidation is a collective remedy for the benefit of all creditors, there would be an inevitable risk that the debt becomes unrecoverable due to other creditors of the debtor company taking priority in the final distribution.

[1] Section 55A CICA
[2] Section 44(2) CICA
[3] Re Unicorn Holdings Ltd (Unreported 21 November 2022) at [41]
[4] [1974] AC 133
[5] (unreported 3 April 2023), at [4]
[6] Essar v Arcelormittal[2021] CICA J0503-1, at [36]
[7] Discover Investment Company v Vietnam Holding Asset Management Ltd & Another [ 2018 (2) CILR 424], at [26]
[8] Ibid, at [36], also cited by the Grand Court in ​Hangzhou Lingqin Investment Partnership Enterprise (Limited Partnership) v (1) Harneys Liquidation Services (Cayman) Ltd (2) Harneys Fiduciary (Cayman) Ltd (Unreported 7 June 2022) at [31]
[9] NE Securities, at [8]