Companies incorporated in the Cayman Islands usually conduct operations and hold assets elsewhere than in the Cayman Islands and Cayman Islands corporate insolvencies therefore commonly have a significant international dimension. Corporate insolvencies are conducted under the supervision of the Financial Services Division of the Grand Court of the Cayman Islands and the requirements of Cayman law mean that the insolvency practitioners (the liquidators) require court approval (‘sanction’ in the language of the statute) before they can take certain significant steps in the liquidation.
Those steps include: bringing and defending legal proceedings, carrying on the corporate business, making compromises or arrangements with creditors and compromising claims. Another feature of Cayman corporate insolvencies is the liquidation committee: a committee of creditors must be established in respect of every insolvent company being wound up by the court. The liquidators must report to the members of the committee and when the liquidators require sanction the members of the committee are entitled to be heard on the application for sanction. A recent decision In the matter of PAC Ltd (in official liquidation)shows that these features of liquidations in the Cayman Islands can be used to provide an opportunity for creditors based overseas to play an informed and potentially decisive role in important decisions in the liquidation.