New Companies Winding up Rules - Orders 8, 9, 11, 15, 19 and Forms
Last in a series considering The Companies Law (2012 Revision) -Companies Winding Up (Amendment) Rules, 2013 [Supplement No. 3 published with Gazette No. 04, dated 25 February, 2013.]
As of 1 March 2013 the Companies Winding-Up Rules in Cayman have been amended. The rules that have been changed are under Orders 3, 8, 9, 11, 15, 19 and 25, and some of the forms have also been changed. Previously we’ve looked at the appointment of foreign lawyers in regard to changes arising from Order 25, at the petition and changes to Order 3. Here we take a brief look at the remaining changes to Orders 8, 9, 11, 15, 19 and changes to three forms.
Order 8 Meeting of creditors/contributories
The Order now allows meetings to be held in the form of a telephone conference call, provided that all notices and advertisements of the meeting either gives the dial in telephone number and codes, or provides a contact number and an email address to which creditors or contributories may apply to get them. (O. 8, r 5). O. 8, r 10 (5) gives a deadline of 28 days from the date of the meeting for a copy of the minutes of every meeting to be circulated to the creditors and contributories.
Order 9 – Establishment of Liquidation Committee
Order 9 rule 1(1) now reads that “Unless the Court otherwise directs, a liquidation committee shall be established…” giving the Court a general discretion to dispense with the liquidation committee. This removes the former requirement under O. 9, r 1 (7) that the Official Liquidator had to show that it was "practically impossible" to form a committee in accordance with the standard requirements before any variation to the standard constitution could be obtained.
Order 11 – Sanction Applications
A new rule has been added (O.11, r. 3) to deal with sanction applications that raise issues as between creditors and or contributors and the company. The rule allows the Court to direct that the sanction application should proceed as an action between the parties in dispute, and that it may make a representation order, or limit the official liquidator’s role, or direct that the official liquidator not get involved in the proceedings any further.
Order 15 – Application for Supervision Order
Here the changes relate to the hearing of a s.124 Petition (where a liquidator forms the view that the company is or is likely to become insolvent he is legally obliged to put the liquidation under court supervision). If the voluntary liquidator is a qualified insolvency practitioner who has sworn an affidavit verifying that he is willing and properly able to accept appointment as official liquidator, a Judge may make supervision order under s. 124 of The Companies Law (2012 Revision) without the need for a hearing if he is satisfied that:
- Notice of the petition has been given to the company’s creditors and, where it appears to the voluntary liquidator that the company may in fact be solvent, to its shareholders; and
- There is no reason to believe any creditor or, if applicable, any shareholder objects to the appointment of the voluntary liquidator as official liquidator.
The voluntary liquidator must give notice of the hearing of the petition to the company’s creditors and, if applicable, to its shareholders in whatever manner is likely to bring it to their attention.
This adds changes regarding the transfer of shares pursuant to s 99 of the The Companies Law (2012 Revision). The application (by letter addressed to the Judge to whom the proceeding is assigned) may be made by the transferor/transferee or liquidator provided the shares are fully paid and the liquidator does not object. O.19, r. 5 sets out the supporting documentation required (an affidavit and a draft order). This formalises a practice widely adopted of Judges dealing with such applications on the papers without a hearing
Changes to Forms
Form No. 3 - Advertisement of Winding Up Petition
The form now includes details of the proposed liquidators and has wording that any creditor or shareholder who opposes the appointment of the Petitioner’s nominated liquidators must nominate an alternative qualified insolvency practitioner who both consents to act and has sworn an affidavit which complies with O. 3, r 4.
Form No. 21 - Declaration of Solvency
This now includes a warning on the penalties faced by a person who knowingly makes a declaration that the company will be able to pay its debts in the time frame stated, without reasonable grounds on which to base such an opinion, that he or she may be subject to a $10,000 fine and up to two years of imprisonment.
Form No. 22 - Advertisement (Application for Supervision Order)
Additional wording added on the identity of those appointed as voluntary liquidator and (as with Form No 3) wording identifying who is proposed as official liquidator andthat any creditor or shareholder who opposes the appointment of the Petitioner’s nominee must nominate an alternative qualified insolvency practitioner who both consents to act and has sworn an affidavit which complies with O. 3, r 4.