When a Cayman Islands company (CayCo) goes into official liquidation, various transactions entered into in the lead up to that liquidation may be set aside, allowing the recovery of assets of the CayCo to maximise the return to its stakeholders. This snapshot sets out a summary of challenges that may be made to antecedent transactions in the Cayman Islands. These may also apply to Limited Liability Companies, Partnerships, Exempted Limited Partnerships and, in certain circumstances, to foreign companies, but this summary focuses on CayCos.
Certain antecedent transactions effected by CayCo are automatically void whereas others are voidable on the application of (variously): (i) a Liquidator appointed by order, or under the supervision, of the Grand Court of the Cayman Islands (Official Liquidator); (ii) a Liquidator appointed without the intervention of the Court (Voluntary Liquidator) or (iii) the creditor prejudiced by the transaction. Other transactions may give rise to a liability to contribute to the assets of the CayCo.
(i) Void ab initio
When a winding up order has been made, any disposition of CayCo's property and any transfer of shares or alteration in the status of the CayCo's members made after the commencement of the winding up is, unless the Grand Court of the Cayman Islands (Court) directs otherwise, void. The deemed commencement of an official liquidation is either the presentation of the winding up petition or, if preceded by a form of voluntary...
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