Vol 7 (2010) - Issue 5

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Cayman Islands Investment Funds: Winding up Petitions

Introduction
Cayman Islands insolvency law empowers the Grand Court to wind up a company, including corporate investment funds ('funds'), in specified circumstances. This article is intended to summarise those circumstances in light of the number of contested petitions heard recently by the Courts of the Cayman Islands initiated by fund investors, chiefly as a result of the global recession.

'Standing' to present a winding up petition
Before the Grand Court will consider the merits of a winding up petition, the petitioner must show that he falls within one of the categories of persons permitted to seek a winding up order. Typically petitions are presented by creditors or shareholders ('contributories'). Questions frequently arise in a funds context as to the status of investors who have sought to redeem their investment.
Amendments made to the Companies Law with effect from 1 March 2009 now permit contingent and prospective creditors to present a winding up petition. Previously, only creditors who could show that they were owed a sum of money that was immediately due and payable had standing to present a winding up petition. These amendments to the Companies Law are unlikely to make a material difference to the circumstances in which the Grand Court would be prepared to make a winding up order in a funds context. This is because fund investors have always had standing to issue a winding up petition in their capacity as shareholders. Although an investor whose right to receive redemption proceeds has been suspended may also (or independently) now have standing to present a winding up petition on the basis that they are a contingent creditor, the key question remains whether or not there are sufficient grounds to justify the Court making a winding up order.