British Virgin Islands (“BVI”)
The BVI is predominately an incorporations jurisdiction with some 400,000 companies registered in the territory. The companies are mainly holding companies, owning shares in companies or assets domiciled in other jurisdictions. As such, the ongoing financial viability of BVI entities is inextricably linked to what happens in those other jurisdictions. In the past few months we have seen an increase in the number of queries from creditors and debtors seeking to understand what their options are in protecting the value of their claims and investments. Some of the main issues we see impacting onshore entities which will ultimately impact BVI companies include:- A lack of liquidity to meet financial obligations. This may result from a lack of sales, an inability to obtain payment from debtors or a hold on distributions payable on an investment of finance facility (e.g. lines of credit).
- The enforced closure of operations or breakdown in supply chains, affecting the ability to produce the product the group offers.
- Diminishing asset values that negatively impact company balance sheets and liquidity as well as lending covenants and maintenance margins on margin accounts.
- Governments of most of the main jurisdictions with investment in BVI entities have implemented stimulus packages to counteract the economic damage to their contracting economies.
- Given almost all industries have been adversely effected one way or another, there is a feeling that restraint will be applied to enforcing claims to recover outstanding monies, at least in the short term.
- Insolvency legislation is being reviewed and, in some countries emergency legislation has been passed to suspend certain aspects of insolvency laws to assist those entities struggling during this time.
- Creditors are moving to issue statutory demands to be a step ahead in protecting their claims should action eventually become necessary.
- Security positions are being reviewed to determine whether coverage can be extended to offset the decline in the value of assets held as collateral.
- Consideration of debt for the equity swaps for businesses that have strong underlying foundations.
Cayman Islands
The Cayman Islands’ Government took significant measures to suppress the spread of the virus such as closing the islands’ borders from 22 March 2020. Most non-essential businesses were forces to close, with individuals working remotely where possible. Local businesses, particularly those reliant on tourism have been badly affected and we have already seen the permanent closure of several long-standing companies as a result of the lockdown. The Government is providing financial assistance to eligible local businesses and individuals, however with the islands’ borders forecast to be closed until at least 1 October 2020, it remains to be seen at what pace companies are able to recover. At this point, it seems likely that we will continue to see increased insolvency and restructuring activity in this sector of the economy. In addition to tourism, the Cayman Islands is one of the leading offshore jurisdictions for establishing investment funds and is estimated to house more than 75% of the world’s offshore hedge funds. While it may be too early to provide a proper analysis of the likely impact on investment funds in the Cayman Islands, it is widely expected that they will encounter increasing liquidity issues due to increased redemption requests from anxious investors and global market volatility of from investors seeking to redeploy capital to other opportunities. There will likely be options available in these circumstances, however, fund Directors will need to be acutely aware of their obligations, seek the appropriate advice and take the appropriate steps at as early a stage as possible. The interpretation of a fund’s governing documents in the light of current global uncertainty will be key in determining what steps can be taken in an attempt to manage these issues and mitigate the potential impact on the future of the fund. As we have seen previously, a significant economic downturn can also be a catalyst in terms of exposing any pre-existing wrongdoing or fraud in the conduct of a company or a fund, which may also lead to an increase in insolvency related appointments. As with our BVI office, we have received an increase in enquiries for advice on restructuring options facing directors and companies to preserve value for stakeholders and to mitigate liabilities (for both the company and its directors). Additionally, we have already seen an uptick in the number of insolvency enquiries we receive, including from our International network affiliates, and we expect this trend to continue as the world continues to adapt.-
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In The Know: Cayman Islands Voluntary Liquidations Deadlines and Dates
09 October 2023
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Forensic and Advisory Solutions: A Comprehensive Guide for Stakeholders and Directors
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Entity Closure Solutions
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R&H Restructuring
As an affiliate of Rawlinson & Hunter in the Cayman Islands, we benefit from our relationship with the local and international grouping. In addition to the Rawlinson & Hunter affiliation, our ongoing strategic international partnerships provides us with immediate access to resources for effectively servicing clients anywhere in the world.
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