Vol 19 (2022) - Issue 6

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The New Cayman Islands Rescue Regime: An Analysis of the Doctrinal Architecture and Its Application in Practice

Synopsis
This article examines the doctrinal underpinning of the new Cayman Islands' rescue regime with comparisons to the UK, US and old style common law jurisdictions. It is not interested in explaining every prosaic element of the regime. Rather it looks at fundamental philosophical assumptions that inform its drafting to understand where it might therefore fit in the spectrum of cross border restructuring citizenry.
The world's major economies have generally adopted modern 'low entry' corporate rescue regimes for debtors. Fundamental to this is the ease of entry into the rescue process. No rescue process can function without a stay. Such a statement should not be controversial, especially when one considers that with any common law liquidation, a stay is de rigueur. It would be illogical for it not also to apply to rescues.
An insolvency proceeding protects creditors' rights by preventing non-collective disorderly individual grabs, and ensuring that the proceeds of the debtor's assets are divided between the creditors according to the priority of claims. For the debtor, the insolvency stay seeks to preclude the piecemeal dismemberment of debtor property.
This debtor-side policy now manifests itself in corporate judicial rescues, instead of final liquidations. The aim is to help debtors survive temporary problems and thereby improve unsecured creditor returns. It creates the necessary ecosystem for the Cayman Islands to become a global restructuring hub.