The Cayman Islands Government has announced that the Companies (Amendment) Act 2024 will come into force on 1 January 2026.
The amended legislation will introduce significant changes to corporate procedures including the ability to reduce share capital without court approval.
Passed by parliament and published on 11 March 2024, it aims to enhance the jurisdiction’s competitive advantage in the international financial services market through increased flexibility for corporate entities.
A key change allows solvent companies to reduce their share capital through a special resolution supported by directors’ solvency statements, avoiding the time and expense of court proceedings.
“Under this new ‘out of court’ procedure, a reduction of capital can be made by a special resolution which is supported by a solvency statement,” according to analysis from Walkers.
The solvency statement must confirm directors have conducted a full enquiry into the company’s affairs and believe it can pay debts as they fall due, made no more than 30 days before the special resolution.
Another significant amendment expands migration options for foreign entities.
“Section 201 of the Companies Act will be expanded to provide that a body corporate with limited liability and without a share capital under the laws of any jurisdiction outside the Cayman Islands may apply to the Registrar of Companies to be registered by way of continuation,” as noted Ogier’s legal team.
Previously, only foreign corporations with share capital could transfer into the Cayman Islands, limiting options for certain international structures.
The amendments also introduce conversion mechanisms between different Cayman entity types.
“A Cayman Islands LLC may be converted into an exempted company, and a Cayman Islands foundation company may be converted into an exempted company,” according to Ogier’s analysis.
This mirrors existing provisions allowing exempted companies to convert to LLCs, providing flexibility for entities whose circumstances change or who need different structures for transactions like initial public offerings.
Walkers says the Act clarifies rules around public offerings by defining “public in the islands” to exclude exempted limited partnerships, exempted companies, Cayman LLCs, foreign entities registered locally, sophisticated persons and high net worth individuals.
The four partners at Walkers that drafted the key takeaways described the amendments as “a welcome evolution of Cayman Islands company law” developed “in close consultation with stakeholders in the Cayman Islands financial services industry”.
Additional changes include allowing exempted companies to re-register as ordinary resident companies, which primarily conduct business within the Cayman Islands subject to local ownership rules.
The court-sanctioned capital reduction procedure remains available for companies preferring or requiring judicial oversight, particularly in complex or contested situations.
Companies wishing to use the new out-of-court reduction procedure must ensure their articles of association authorise this approach, potentially requiring constitutional amendments before implementation.
