RHR Highlights – Restructuring Officer

At the end of last year the Parliament of the Cayman Islands approved amendments to the Companies Act to allow for the appointment of a Restructuring Officer to an insolvent company in certain circumstances. The amendments, along with the accompanying rules and forms, are expected to come into effect in the next few months. This dedicated restructuring regime will replace Provisional Liquidation as the principal statutory restructuring tool available to a company in financial difficulty. While the Provisional Liquidation procedure had often been used to good effect to implement a restructuring plan, it was far from ideal as it required the simultaneous presentation of a winding up petition which had the ability to create reputational and commercial issues for a company looking for a way through short term financial difficulties. Unlike Provisional Liquidation, there is no requirement for the filing of a winding up petition as part of the application for the appointment of a Restructuring Officer. Under the new legislation, the filing of a petition for the appointment of a Restructuring Officer would provide an automatic stay on claims against the company with extra-territorial effect. This more debtor-friendly mechanism should allow time for a restructuring to be explored and implemented. The introduction of a flexible new restructuring procedure is a welcome development, particularly at a time of such global economic uncertainty. It reinforces the position of the Cayman Islands as a key global restructuring jurisdiction. From a practitioner's perspective we hope it provides an opportunity for companies and creditors to work together to find a practical solution to financial difficulties and ensure the best outcome for all stakeholders.