{"id":105776,"date":"2025-05-02T09:17:27","date_gmt":"2025-05-02T09:17:27","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=105776"},"modified":"2025-08-19T11:57:08","modified_gmt":"2025-08-19T11:57:08","slug":"cayman-islands-lending-secured-finance","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/cayman-islands-lending-secured-finance\/","title":{"rendered":"Cayman Islands: Lending &amp; Secured Finance"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-105776","comparative_guide","type-comparative_guide","status-publish","hentry","guides-lending-secured-finance","jurisdictions-cayman-islands"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Appleby<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/03\/Appleby-Logo-PMS-7449-RGB-JPEG.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Appleby<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2020\/03\/Appleby-Logo-PMS-7449-RGB-JPEG.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Lending &amp; Secured Finance laws and regulations applicable in Cayman Islands<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do foreign lenders (including non-bank foreign lenders) require a licence\/regulatory approval to lend into your jurisdiction or take the benefit of security over assets located in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no restrictions on a foreign lender granting loans to Cayman Islands entities unless the foreign lender commences a lending business within the Cayman Islands or establishes a branch within the Cayman Islands.\u00a0 Similarly, there are no restrictions on granting security or guarantees to foreign lenders.\u00a0 However, as a practical matter, the foreign lender would generally engage an agent to enforce any security interest over property (such as real estate) located in the Cayman Islands.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws or regulations limiting the amount of interest that can be charged by lenders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no statutory provision for the rate of interest that can be charged on loans.\u00a0 However, in 2021, the Law Reform Commission undertook a review of the common law and statutory position relating to usury in the Cayman Islands.\u00a0 It was concluded that there is a strong basis to argue that the common law prohibition against usury remains applicable in the Cayman Islands.\u00a0 Legislation was submitted to the Honourable Attorney General for consideration which would serve to abrogate the common law offence of usury and any related rule of the common law and preserve the rights, remedies, liabilities and interest obligations under agreements entered into prior to the commencement of the legislation.\u00a0 The legislation has not yet been enacted.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any laws or regulations relating to the disbursement of foreign currency loan proceeds into, or the repayment of principal, interest or fees in foreign currency from, your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no limitations as a matter of Cayman Islands law on the currency used in any financing transaction.\u00a0 The most common currency used in cross-border loans is either US dollars or euros.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can security be taken over the following types of asset:  i.\treal property (land), plant and machinery; ii.\tequipment; iii.\tinventory;  iv.\treceivables; and v.\tshares in companies incorporated in your jurisdiction.               If so, what is the procedure \u2013 and can such security be created under a foreign law governed               document?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p><strong>i. real property (land), plant and machinery;<\/strong><\/p>\n<p>Security over real property is usually granted either by way of legal mortgage, where title is transferred to the lender, or an equitable mortgage where a charge is created without title being transferred.\u00a0 Upon enforcement of the equitable mortgage, the secured creditor will be able to have the real property transferred to it.<\/p>\n<p>A legal mortgage will be perfected by a transfer of the real property into the name of the secured creditor and the updating of the Land Register in accordance with the Registered Land Act (RLA).<\/p>\n<p>An equitable mortgage over real property can be created by execution of an equitable mortgage, a transfer of real property that is not perfected by registering the secured creditor in the Cayman Islands Land Register in accordance with the RLA (as Revised); or a deposit of the relevant title deeds by way of security.\u00a0 The mortgagor would typically grant an irrevocable power of attorney enabling the secured creditor to execute a transfer and other related documents upon default.\u00a0 This can either be set out in the mortgage agreement or as a separate power of attorney.<\/p>\n<p>A third party purchaser for value that does not have notice of the equitable mortgage will not be subject to it.<\/p>\n<p>Security over plant and machinery would typically be granted by way of fixed or floating charge; usually documented as a deed.\u00a0 A Cayman company is required to make an entry in its register of mortgages and charges in respect of any security interest created over its property but failure to do this does not invalidate the security interest.<\/p>\n<p>Ships and aircraft are considered tangible moveable property.\u00a0 However, a special regime applies to the taking of security over ships and aircraft if they are registered in the Cayman Islands.<\/p>\n<p><strong>ii. equipment;<\/strong><\/p>\n<p>Security is granted over equipment by way of fixed or floating charge; usually documented as a deed. As noted above, a Cayman company must make an entry in it register of mortgages and charges in respect of a security interest over its property.<\/p>\n<p><strong>iii. inventory; <\/strong><\/p>\n<p>Typically security over inventory would be granted by way of floating charge (usually a deed) due to the fluctuating nature of inventory.\u00a0 As noted above, a Cayman company must make an entry in it register of mortgages and charges in respect of a security interest over its property.<\/p>\n<p><strong>iv. receivables;<\/strong><\/p>\n<p>Security can be granted over receivables (choses in action) by way of fixed or floating charge and\/ or by assignment (legal or equitable).\u00a0 Secured parties should endeavor to obtain the acknowledgement and agreement of the third party debtor (regardless of whether consent is contractually required) in order to help facilitate enforcement.<\/p>\n<p>A legal assignment requires an absolute assignment of the whole of a present chose in action which must be in writing, signed by the assignor and notified in writing to the debtor.<\/p>\n<p>In the case of an equitable assignment, generally only part of a chose in action is assigned and written notice is not required to be, but generally is, given to the debtor as the priority of equitable interests in respect of contractual rights is determined by the order in which such notice is given. As noted above, a Cayman company must make an entry in its register of mortgages and charges in respect of a security interest over its property.<\/p>\n<p><strong>v. shares in companies incorporated in your jurisdiction.<\/strong><\/p>\n<p>Security over shares in a Cayman Islands exempted company (where the register of members is maintained in the Cayman Islands) is usually taken in the form of a legal or equitable mortgage.\u00a0 Cayman Islands conflicts of laws rules provide that\u00a0 the appropriate law to govern any security over registered shares of a Cayman Islands company should be the law applicable to the location of its register of members.<\/p>\n<p>A legal mortgage is granted by execution of a mortgage agreement that transfers legal title in the shares to the secured creditor subject to a requirement to re-transfer the shares upon satisfaction of the underlying secured obligations. Perfection occurs upon transfer of the shares into the name of the secured creditor and the updating of the company\u2019s register of members.\u00a0 Generally the company\u2019s constitutional documents will give the directors discretion whether or not to register a transfer of shares.\u00a0 Accordingly the secured creditor will require either an amendment to the constitutional documents of evidence of approval of the transfer.<\/p>\n<p>While a legal mortgage or charge would avoid the risk of being defeated by a bona fide third party purchaser for value, many lenders prefer to take an equitable interest as direct ownership of the shares may result in accounting, tax, regulatory or other practical concerns.<\/p>\n<p>An equitable mortgage is effectively an agreement to create a legal mortgage upon enforcement.\u00a0 An equitable mortgage can be created by agreement; a transfer of shares that is not registered by entering the secured creditor on the company\u2019s register of members or by depositing the relevant share certificate(s) by way of security.<\/p>\n<p>Various steps are typically undertaken to improve the quality of the security including annotations against the relevant interest on the applicable corporate register and pre-signed but undated transfer documents.\u00a0 It is also common for the directors of the company to resolve to register a transfer of shares upon an enforcement event, at the time of creating the security and to provide these, together with irrevocable written instructions to the registered office of the company to register the transfer upon enforcement without further authorisation.<\/p>\n<p>A secured creditor may elect to file a stop notice with the Cayman Islands Grand Court.\u00a0 A copy of the stamped notice and accompanying affidavit would then be served on the company.\u00a0 The effect of the stop notice is to prevent the registration of any transfer of the relevant shares for a period of 14 days after the secured creditor has been given notice of a proposed transfer.\u00a0 Whilst a stop notice will not prevent a transfer it gives the secured creditor an opportunity to enforce its security or put the third party on notice of its security interest prior to registration of the transfer.<\/p>\n<p><strong>If so, what is the procedure \u2013 and can such security be created under a foreign law governed <\/strong><strong>document?\u00a0 <\/strong><\/p>\n<p>See comments above regarding the requisite procedures.<\/p>\n<p>In most cases, assets of a Cayman Islands exempted company will be located outside of the Cayman Islands (with the exception of land, shares\/ securities issued by another Cayman entity and aircraft and vessels registered in the Cayman Islands which are subject to a separate security regime).<\/p>\n<p>Cayman Islands law allows security documents to be governed by foreign law.\u00a0 In practice, it is common for security granted over foreign assets of a company to be governed by the governing law of the underlying lending document or the jurisdiction where the asset is located.\u00a0 Cayman Islands law does not dictate perfection requirements where security over a company\u2019s foreign assets is governed by foreign law.\u00a0 A Cayman Islands company would however still be required to maintain its register of mortgages and charges containing details of security interests created by it.\u00a0 Such register must be open to inspection by any creditor or member of the company at all reasonable times.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a company that is incorporated in your jurisdiction grant security over its future assets or for future obligations?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Cayman Islands law follows the English law position that security over future assets is valid in equity.\u00a0 As such, with the exception of pledges and liens, where delivery of the physical asset is required, it is possible to take an equitable security interest over future assets under a security document. The relevant security document should make clear that the security interest is to attach to assets acquired in the future without any further acts being carried out by any party and should describe the assets adequately in order that it is clear that the asset falls within the terms of the security.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a single security agreement be used to take security over all of a company\u2019s assets or are separate agreements required in relation to each type of asset?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A security interest may be granted by a general security agreement over a range of asset types.\u00a0 The main types of security utilised as a matter of Cayman Islands law are mortgages (legal and equitable), charges (fixed and floating), liens and assignments of rights by way of security.\u00a0 The formalities and manner of perfection of such security interests will depend upon the nature of the underlying collateral assets and where such collateral assets are located.<\/p>\n<p>Special regimes apply to the taking of security over certain assets such as ships, aircraft and land if registered in the Cayman Islands.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any notarisation or legalisation requirements in your jurisdiction? If so, what is the process for execution?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>With limited exceptions, there are no notarisation or legalisation requirements in relation to the granting or perfection of security interests.\u00a0 Court fees will be due as part of any enforcement process.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any security registration requirements in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Ranking of security interests over ships and aircraft are subject to a special regime relating to registration.<\/p>\n<p>If a charge or mortgage is granted over Cayman Islands real estate, then stamp duty will be payable based on a percentage of the principal sum together with a fee payable to register the charge\/ mortgage at the Cayman Islands Land Registry.<\/p>\n<p>Entry of the security on a register is not a perfection step but does provide priority to a lender based on the order of registration.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any material costs that lenders should be aware of when structuring deals (for example, stamp duty on security, notarial fees, registration costs or any other charges or duties), either at the outset or upon enforcement? If so, what are the costs and what are the approaches lenders typically take in respect of such costs (e.g. upstamping)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Unless the document needs to be executed in the Cayman Islands, it is common to execute documents outside of the Cayman Islands so that stamp duty is not payable.\u00a0 However, if the documents are executed in, or brought into the Cayman Islands, stamp duty and potentially court fees (in the case of enforcement action) will be payable.<\/p>\n<p>The amount of stamp duty will vary depending upon the type of document and the nature of the assets subject to the security interest.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can a company guarantee or secure the obligations of another group company; are there limitations in this regard, including for example corporate benefit concerns?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, a Cayman Islands company can guarantee or secure the obligations of another group company.\u00a0 \u00a0Confirmation of corporate benefit (i.e, that the provision of the guarantee is in the best interests of the particular entity \u2013 particularly in the case of upstream or cross-stream guarantees), should be clearly addressed in the resolutions of the applicable Cayman Islands guarantor.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions against providing guarantees and\/or security to support borrowings incurred for the purposes of acquiring directly or indirectly: (i) shares of the company; (ii) shares of any company which directly or indirectly owns shares in the company; or (iii) shares in a related company?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no financial assistance rules under Cayman Islands law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can lenders in a syndicate (or, with respect to private credit deals, lenders in a club) appoint a trustee or agent to (i) hold security on the lenders\u2019s behalf, (ii) enforce the lenders\u2019 rights under the loan documentation and (iii) apply any enforcement proceeds to the claims of all lenders in the syndicate?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A Cayman Islands court would recognise the role of a security agent or trustee and would allow the security agent or trustee to enforce the loan documentation and collateral security and to apply the proceeds to the claims of the lender pursuant to the terms of the intercreditor, loan and security documentation.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">If your jurisdiction does not recognise the role of an agent or trustee, are there any other ways to achieve the same effect and avoid individual lenders having to enforce their security separately?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Cayman Islands law does recognise agent and trustee relationships.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do the courts in your jurisdiction generally give effect to the choice of other laws (in particular, English law) to govern the terms of any agreement entered into by a company incorporated in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Cayman Islands courts will give effect to the choice of foreign law as the governing law of a contract provided that it is reasonable, not contrary to public policy and decided in good faith.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Do the courts in your jurisdiction generally enforce the judgments of courts in other jurisdictions (in particular, English and US courts) and is your country a member of The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (i.e. the New York Arbitration Convention)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Any final and conclusive judgment for a definite sum (not being a sum payable in respect of taxes or other charges of a like nature nor a fine or other penalty) and\/or certain non-monetary judgments rendered in any action or proceedings brought in a foreign court (other than certain judgments of a superior court of any state of the Commonwealth of Australia) will be recognised as a valid judgment by the courts of the Cayman Islands without re-examination of the merits of the case. \u00a0On general principles, we would expect such proceedings to be successful provided that the court which gave the judgment was competent to hear the action in accordance with private international law principles as applied in the Cayman Islands and the judgment is not contrary to public policy in the Cayman Islands, has not been obtained by fraud or in proceedings contrary to natural justice.<\/p>\n<p>The New York Arbitration Convention was extended to the Cayman Islands on 26 November 1980.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What (briefly) is the insolvency process in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The test of insolvency in the Cayman Islands is a cash-flow test in that a company may be liable to be wound up if it is unable to pay its debts which are immediately due and payable or its debts which will become due and payable in the reasonably near future.\u00a0 Where a company is insolvent or bordering on insolvency but not faced with inevitable liquidation, the directors must undertake a balancing exercise between the interests of the creditors and shareholders, with more weight being given to the interests of the creditors as the company moves closer to insolvency.<\/p>\n<p>There are three types of insolvency\/ liquidation proceedings in the Cayman Islands: voluntary, provisional and official liquidations.<\/p>\n<p>Voluntary liquidation: &#8211; may be used (i) when the fixed period, if any, for the duration of the company in its memorandum and articles (M&amp;A) expires; (ii) if an event occurs which the M&amp;A provide is a trigger to winding up; (iii) if the company resolves by special resolution to be wound up voluntarily; or (iv) if the company resolves by ordinary resolution that it be wound up because it is unable to pay its debts as they fall due.<\/p>\n<p>The company should cease its business activities, pay its creditors and distribute any remaining assets to its shareholders.\u00a0 Generally a voluntary liquidator will be appointed in place of the directors.\u00a0 There is no qualification requirement for this role.<\/p>\n<p>Once the affairs of the company have been fully wound up and the requisite notices have been gazetted, the liquidator will call a general meeting to present an account of the voluntary liquidation, following which they will file a return with the Cayman registrar of companies.\u00a0 The company will then be deemed resolved three months later.<\/p>\n<p>Provisional liquidation \u2013 after the presentation of a winding up petition, the company can apply for the appointment of provisional liquidators for the purpose of presenting a compromise or arrangement to creditors. \u00a0Once provisional liquidators are appointed, an automatic stay on the commencement or continuation of legal proceedings will apply, allowing for a restructuring to be pursued. \u00a0Secured creditors will not be prevented from enforcing their security.<\/p>\n<p>Official liquidation \u2013 the company, a creditor, any shareholder or the Cayman Islands Monetary Authority (CIMA) may petition the court to make a winding up order and appoint official liquidators to collect the company\u2019s assets and distribute them to the company\u2019s creditors, with any surplus assets to go to the company\u2019s shareholders. \u00a0The powers of the directors will cease as the liquidators control the company subject to the court\u2019s supervision. \u00a0Upon making a winding up order, an automatic stay is imposed prohibiting any suit, action or other proceeding without the leave of the court.\u00a0 Secured creditors may still enforce their security.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What impact does the insolvency process have on the ability of a lender to enforce its rights as a secured party over the security?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Secured creditors can enforce their security without reference to any liquidator appointed.\u00a0 If the sale proceeds are insufficient to discharge the outstanding obligations, the creditor can claim as an unsecured creditor in the liquidation for the balance of the debt.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Please comment on transactions voidable upon insolvency.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Pre-insolvency transactions can be challenged if they constitute (i) a voidable preference, (ii) a disposition at an undervalue;\u00a0 or (iii) fraudulent trading\/ dispositions.\u00a0 Property dispositions and transfers of shares made after the presentation of a winding up petition will also be void if the court makes a winding up order.<\/p>\n<p>Voidable preferences arise where, within six months prior to the commencement of liquidation and when the company was unable to pay its debts, it made a transfer of property, granted a charge or made payment to a creditor with a view to preferring that creditor over other creditors.<\/p>\n<p>Dispositions at an undervalue &#8211; any disposition at an undervalue made in the six years prior to the liquidation with an intent to defraud creditors shall be voidable at the instance of the liquidator of the company.<\/p>\n<p>Fraudulent trading \u2013 the liquidator can apply to court for a declaration that any persons who were knowingly parties to fraudulent trading shall contribute to the company\u2019s assets in the amount that the court thinks proper.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is set off recognised on insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes.\u00a0 Contractual set off provisions remain enforceable in a liquidation.\u00a0 In the absence of contractual set off provisions, statutory set off provisions will apply to take account of what is due between the insolvent company and the counterparty. Set off only applies if the debts are mutual (ie. between the same parties and in the same capacity).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any statutory or third party interests (such as retention of title) that may take priority over a secured lender\u2019s security in the event of an insolvency?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Cayman Islands law provides for a limited class of preferential creditors.\u00a0 Preferred debts include wages accrued during the four months immediately preceding the commencement of the liquidation, payments due in respect of any medical health insurance premium and any taxes due to the Cayman Islands Government.\u00a0 Under the Companies Act (as Revised) preferred creditors rank ahead of unsecured creditors and ahead of secured creditors with security in the form of a floating charge but behind the liquidator\u2019s remuneration and expenses.<\/p>\n<p>Any subordination agreements entered into prior to the commencement of the liquidation will be binding and enforced by the official liquidator.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any impending reforms in your jurisdiction which will make lending into your jurisdiction easier or harder for foreign lenders?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no impending reforms that are expected to change the existing regulatory or legal environment for foreign lenders.<\/p>\n<p>There was however a recent consultation on a new resolution and recovery framework (taking the form of a CIMA Rule and Statement of Guidance) which (if implemented) would apply to Cayman based retail banks and is intended to be the equivalent of the European resolution and recovery directive for banks. \u00a0If implemented in its current form, it will create a harmonised recovery and resolution planning framework for Cayman retail banks, Cayman direct insurers and reinsurers. \u00a0It will provide CIMA with powers to resolve in-scope regulated entities where they are failing or likely to fail, as an alternative to normal insolvency proceedings.\u00a0 The consultation has been heavily commented on by local industry groups.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What proportion of the lending provided to companies consists of traditional bank debt versus alternative credit providers (including credit funds) and\/or capital markets, and do you see any trends emerging in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The proportion of lending consisting of traditional bank debt versus alternative credit providers and capital markets can vary significantly by region, and economic conditions over time.\u00a0 Historically, traditional bank lending has been the primary source of debt for companies, particularly small to medium sized enterprises.\u00a0 In many economies estimated to be between 60% &#8211; 80% of total corporate debt.<\/p>\n<p>Alternative credit providers including peer to peer lending, private equity firms, hedge funds and specialty finance companies can range from 10% to 30% of total lending depending on the specific sector of the economy.<\/p>\n<p>In the alternative credit space we see rapid growth and market share expansion (private credit funds, online lenders booming, peer-to-peer lending) and regulatory arbitrage increasing as alternative credit providers are often less regulated than banks, allowing for more innovation and risk-taking.<\/p>\n<p>The trend is really a blurring of lines as banks are beginning to mimic fintech and alternative lenders are becoming more regulated.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Please comment on external factors causing changes to the drafting of secured lending documentation and the structuring of such deals such as new law, regulation or other political factors<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is nothing specific to the Cayman Islands but secured lending documentation will be generally influenced by: (i) regulatory changes &#8211; requiring updates to compliance language and risk mitigation strategies; (ii) market conditions \u2013 economic fluctuations, interest rates and competition can affect loan terms and adjustments to reflect changes in borrower risk profiles and lender requirements; (iii) technological advancements \u2013 the rise of fintech and blockchain can lead to new forms of collateral and methods of securing loans, necessitating innovative drafting techniques; (iv) investor demands \u2013 investors may require increased transparency or specific provisions regarding collateral management; (v) globalisation \u2013 legal harmonisation and international standards may influence documentation practices; (vi) environmental, social and governance factors (ESG) \u2013 increasing emphasis on ESG considerations may lead to stipulations in lending documents related to sustainability and corporate responsibility; and (vii) general market trends \u2013 the popularity of certain financial products or lending structures can influence the drafting practices.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">4225<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/105776","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=105776"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}