Cayman Islands Preference Share Financing And Redemption Rights

Introduction

Cayman Islands exempted companies are commonly used by venture capital and private equity investors for pre-IPO preference share financings. The Cayman Islands' well-established legal system based on English common law, robust and business-friendly regulatory framework, network of professional service providers and tax neutral environment have all contributed to its status as the pre-eminent offshore jurisdiction for start-up and venture capital financing.

Given the flexibility of the Cayman Islands corporate law regime, many commercial terms can be accommodated. The memorandum and articles of association (M&AA) of the company and other contractual documents used in a preference share financing are usually drafted with various provisions to protect the investors' interests, including, dividend rights, liquidation preferences, and exit rights that anticipate an initial public offering, trade sale or other forms of exit within a specific timeframe