Following the presentation of a creditor’s winding up petition, the company petitioned for the appointment of restructuring officers. The automatic extraterritorial moratorium on all proceedings (excluding criminal proceedings) against the company under s91G took effect upon the filing of the company’s petition. Justice Kawaley noted that the s91G stay "turbo charges" the degree of protection that filing a restructuring petition affords to the petitioning company, in contrast with the remedy of presenting a winding up petition for restructuring purposes which only definitively stays proceedings when a provisional liquidator is appointed or a winding up order is made (s97(1) of the Act). It was noted that a creditor had filed a winding up petition in Hong Kong the day before the Cayman Islands hearing, in breach of the Cayman Islands stay, such that it “would have been difficult for the Court to hear them or place much reliance on their objections as to the merits of the Petition”.

Justice Kawaley held that case law relating to the former rescue regime, "light touch" provisional liquidation, was pertinent to the restructuring officer regime. He noted that the grounds upon which a restructuring petition may be presented under s91B(1) are expressed in the same terms as the grounds for appointing provisional liquidators for restructuring purposes under the former provisions of s104(3) of the Act prior to the commencement of the restructuring officer regime. The solvency test for restructuring purposes is the same as that applicable to winding up proceedings as well (s93 of the Act, “Definition of Inability to pay debts”). Further, on a practical level, the cases under the former regime record valuable judicial and legal experience in essentially the same commercial sphere. Harneys had argued for this in its Legal Guide, The Cayman Islands insolvency reform: Restructuring officer and refined scheme of arrangement (see page 3).

1. that the statutory precondition of insolvency or likely insolvency of the company is met by credible evidence;
2. the statutory precondition of an intention to present a restructuring proposal to creditors or any class thereof is met by credible evidence of a rational proposal with reasonable prospects of success; and
3. the proposal has or will attract the support of a majority of creditors as a more favourable alternative to a winding up of the company.

As to 1 above, a company petitioning for the appointment of a restructuring officer is likely in most cases to have little difficulty in establishing insolvency. It is unlikely that the management’s admission of insolvency will lack credibility, and there is rarely any commercial advantage to be gained by a solvent company falsely professing its insolvency.

Lastly, Justice Kawaley allowed dispensation with the formal advertising requirements under the Companies Winding Up Rules 2018 on the basis that the Company had directly notified all unsecured creditors of the petition and its contents together with the hearing date at least 7 calendar days before the hearing. He accepted that the actual notice given to each creditor through an emailed circular was in real world terms more effective notice than would have been achieved through strict compliance with the advertising requirements.

This decision highlights the benefits and flexibility of both the new restructuring officer regime and the Cayman Court’s implementation of the same. Restructuring officer regime is a modern rescue process, paving the way for the Cayman Islands to become a global restructuring hub where investors know they will receive predictable, fair and efficient treatment in distress situations, broadly consistent with rescue regimes across other jurisdictions.