Liquidating a Company in the Cayman Islands

Liquidating a Cayman Islands company can be achieved in a few months and at low cost, provided you follow the straightforward process.

Most cases of company liquidation in the Cayman Islands are voluntary, where a company has become insolvent, is unable to meet its obligations and ceases doing business. Of the approximately 3,500 companies terminated in the first half of 2019, the majority belonged to the Cayman Islands Exempted Company category, followed by the Non-Resident Company and the Resident Company, in that order.

A Voluntary Company Liquidation is where there is no court involvement and the process takes place according to the resolutions of the company’s directors. Court-Supervised Liquidation is similar, but the liquidator is subject to court supervision.

An Involuntary Company Liquidation, or Compulsory Liquidation, is where a creditor, or other party, issues a petition for the winding-up of the company. A Provisional Liquidation is where, in the case of a compulsory winding up, a petition is made to appoint a provisional liquidator.

As an alternative, one or more directors can file an affidavit stating that the company is no longer active, has no assets or liabilities and ask for it to be struck from the Companies Register. The application and affidavit should be approved by a resolution of the directors. Once it is struck off, the company is dissolved. A Company Strike Off is used generally for a company that has never traded.

Investors who want to pursue voluntary liquidation in the Cayman Islands need to go through the liquidation process for the company, whether or not there is court involvement. In nearly all cases it’s advisable to seek professional help to ensure that all creditor claims are met before the company can be struck from the register and officially ceases to exist.

The exact process of liquidating a Cayman Islands company forms part of each company’s Articles of Association and requires a special resolution to be adopted before the liquidation process can be started. The appointed liquidator can be any person chosen by the company’s board.

The company then has 28 days from the appointment of the liquidator to make a Declaration of Solvency that its debts will be fully paid, with interest, within 12 months. The Declaration must be signed by each director. The liquidator is obliged by law to apply for an order that the liquidation be subject to court supervision if a declaration is not signed within the 28 day limit.

The company must remain solvent for the 12 months following the director’s resolution for voluntary liquidation, and creditors’ claims are dealt with by the liquidator.

An account of the liquidation up to the date of the final meeting of the company is prepared by the liquidator and approved by the shareholders. The company is then dissolved via formal notification to the Registrar of Companies.

In both voluntary and compulsory liquidation cases and, where applicable, in a Cayman Islands company strike off, all company assets are collected and distributed to the creditors. Once this process is completed, the final step is to dissolve the company.

A voluntary liquidation of a company, when there are no major complications and where the liquidator has all the necessary information to carry out the task, takes from three to four months to complete.

Costs vary, but can often total less than US$10,000. As always, seek professional assistance in matters of law and finance.