Cayman Islands: Recognising And Assisting Foreign Officeholders In Guernsey And The Cayman Islands

Last Updated: 12 September 2018
Article by Sarah Brehaut, Phoebe Dengate Thrush, Fiona MacAdam and Amy McLeish

Most Read Contributor in Cayman Islands, July 2019


In the increasingly internationalised corporate world, complex cross-border structures which include an offshore entity at some level within the structure are an everyday occurrence. However, the territorial limits of a court's powers can mean that such structures present difficulties for officeholders attempting to conduct an orderly and efficient winding up of a company's affairs.

In seeking to manage cross-border insolvency, officeholders rely on both statutory and common law powers of assistance, the latter of which have been the subject of much judicial debate since Lord Hoffman's articulation of the principle of 'modified universalism' in Cambridge Gas Transport Corporation v The Official Committee of Unsecured Creditors (of Navigator Holdings Plc and others).1

The principle of modified universalism essentially provides that, within the constraints of public policy, courts should co-operate across jurisdictions. Thus, if a court-appointed officeholder operating in one jurisdiction (the 'home jurisdiction') requires assistance from the court of a different jurisdiction (the 'foreign jurisdiction'), the court in that foreign jurisdiction may, as a matter of common law, provide such assistance as that court properly can. Establishing what is proper in a given instance will depend both on the powers available to the court in the home jurisdiction, and also the powers available to the court in the foreign jurisdiction.

While important, the 'golden thread' of modified universalism is not a silver bullet to every jurisdictional difficulty faced by officeholders – each jurisdiction interfaces with the principle of modified universalism in its own way, as demonstrated by a comparison of the different approaches adopted in Guernsey and the Cayman Islands. Neither of these offshore jurisdictions is a party to the UNCITRAL Model Law on Cross-Border Insolvency 1997 (the 'Model Law') and statutory powers of assistance are only available in certain circumstances, with the result that the approach of each jurisdiction to the principle of modified universalism will often be determinative of assistance that can be provided to a foreign officeholder.

Statutory assistance


As explained above, Guernsey is not a signatory to the Model Law and is not a member of the European Union. As such, a foreign officeholder cannot rely upon the EU Regulation on Insolvency Proceedings or the Model Law to seek recognition and assistance in Guernsey. However, for liquidations occurring in England and Wales, Scotland, Northern Ireland, Jersey or the Isle of Man, section 426 of the English Insolvency Act 1986 (the 'Insolvency Act') has been extended to Guernsey by the Insolvency Act 1986 (Guernsey) Order, 1989. As a result, the Royal Court of Guernsey (the 'Royal Court') has a statutory power to provide assistance to officeholders appointed in those jurisdictions.

The procedure under section 426 of the Insolvency Act involves the foreign officeholder applying to the court in their home jurisdiction (i.e. England and Wales, Scotland, Northern Ireland, Jersey, or the Isle of Man) for an order that the home court send a letter of request to the Royal Court seeking assistance. Generally, the Royal Court must comply with the request unless it offends public policy or the outcome would be oppressive. In addition, section 426(5) of the Insolvency Act gives the Royal Court the ability to apply the insolvency law of either Guernsey or the foreign jurisdiction in relation to similar matters falling within its jurisdiction.

Cayman Islands

Companies Law (2018 Revision)

Like Guernsey, the Cayman Islands are not a signatory to the Model Law and prior to 2009, matters relating to cross-border insolvencies were not addressed in Cayman Islands legislation. The Companies (Amendment) Law 2007, which was brought into force on 1 March 2009, introduced what is now Part XVII of the Companies Law (2018 Revision) (the 'Companies Law') which, supplemented by the Foreign Bankruptcy Proceedings (International Cooperation) Rules 2018, sets out a mechanism by which the Grand Court of the Cayman Islands (the 'Grand Court') can provide assistance to the representative of a foreign company which is the subject of bankruptcy or insolvency proceedings in its country of incorporation.

Part XVII of the Companies Law gives the Grand Court a discretionary power to provide assistance for the purposes of:

  1. recognising the right of a foreign representative to act in the Cayman Islands on behalf of or in the name of the foreign company;
  2. enjoining the commencement or staying the continuation of legal proceedings against the foreign company;
  3. staying the enforcement of any judgment against the foreign company;
  4. requiring a person in possession of information relating to the business or affairs of the foreign company to be examined by and produce documents to its foreign representative; and
  5. ordering the turnover to the foreign representative of any property belonging to the foreign company.

In determining whether to provide assistance, the Grand Court is to be guided by 'matters which will best assure an economic and expeditious administration...' of the foreign company's estate, consistent with the following Cayman Islands policy objectives:2

  1. the just treatment of all holders of claims or interests in the foreign company's estate wherever they may be domiciled;
  2. the protection of claim holders in the Cayman Islands against prejudice and inconvenience in the processing of claims in the foreign bankruptcy proceeding;
  3. the prevention of preferential or fraudulent dispositions of property comprised in the foreign company's estate;
  4. the distribution of the foreign company's estate amongst creditors substantially in accordance with the order prescribed by Part V of the Companies Law (i.e. the order of distribution applicable to a liquidation commenced in the Cayman Islands);
  5. the recognition and enforcement of security interests created by the foreign company;
  6. the non-enforcement of foreign taxes, fines and penalties; and
  7. comity.

As noted by Justice Jones in Picard and Bernard L. Madoff Investment Securities LLC (in liquidation) v Primeo Fund (in liquidation),3 even if the foreign proceeding is recognised, the Grand Court may decline to provide assistance if the relief sought by the foreign representative would be likely to produce or contribute to an economic result which is inconsistent with the policy objectives of Cayman Islands corporate insolvency law.

The statutory provision reflects the traditional English common law rule that the court will only recognise the authority of a liquidator or trustee appointed under the law of the country of incorporation. This contrasts with the position under the Model Law which recognises the courts of the country in which an entity has its 'centre of main interests' ('COMI') (which is not necessarily the country in which the company is incorporated) as being competent to exercise bankruptcy jurisdiction.

For the purposes of Part XVII of the Companies Law, 'debtor' is defined as a foreign corporation or other foreign legal entity subject to a foreign bankruptcy proceeding in the country in which it is incorporated or established. It does not include a Cayman Islands company which is the subject of a foreign bankruptcy proceeding and therefore it would not be possible, for example, for a trustee appointed in respect of a Cayman Islands company pursuant to Chapter 11 of the United States Bankruptcy Code to seek recognition and assistance from the Grand Court pursuant to Part XVII of the Companies Law. Assistance may, however, be available as a matter of common law (considered in further detail below).


1 [2006] UKPC 26 (on appeal from the High Court of Justice of the Isle of Man).

2 Section 242 of the Companies Law.

3 [2013 (1) CILR 164]

To view the full article, please click here

This article first appeared in Volume 15, Issue 5 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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