Merging Cayman Islands companies will save time and money when consolidating two or more companies thanks to revisions to the Companies Law effective this month.
Mark Beckford, an attorney with Solomon Harris who specialises in corporate law said, “Before now, companies in the Cayman Islands that wanted to merge into one entity had to use a scheme of arrangement as outlined in sections 86 and 87 of the Law. This required Court approval and would often incur significant fees. The process would often require a great deal of court time and effort.”
Mr Beckford elaborated further, saying, “The new provisions cut through a lot of red tape. Now, both entities will draft a single plan to be approved by the directors of the companies and, if approved by at least 75 percent of the voting shareholders, then the plan would be accepted.
“The plan is then signed off by the directors of the merging companies and then filed with the Registrar of Companies together with supporting documentation. One of such supporting documents is a declaration by a director of each of the merging companies. The Registrar will then issue a certificate of merger or consolidation. The surviving entity remains while the other falls away.”
The new provisions of the Companies Law apply to mergers between Cayman Islands companies and foreign companies.
Mr Beckford said, “The new amendments should make it easier, faster and smoother for companies to merge or consolidate. One or more Cayman Islands companies can merge or consolidate with other foreign companies, provided that the laws of the foreign jurisdiction permit such merger or consolidation. Under the new provisions, however, the surviving company must be a Cayman Islands company.”
According to the Companies Law, if the combination is between a parent company and its subsidiaries then only the director’s authorisation will be required from each participant as long as each company is registered in the Cayman Islands. If a parent company is merging with one or more of its Cayman Islands subsidiaries, shareholder consent will not be required.
Mr Beckford said, “Being outside the court does not mean that the smaller shareholders are being stepped on. They have a right to dissent and may also make application to the court before the merger is complete. Previously, court approval was necessary for all schemes of arrangement, but now this will only be necessary for more complicated combinations where the surviving entity is to be a foreign corporation.”
The new amendments to the Companies Law emerge during a time of turbulence in world financial markets and are viewed by many as a welcome change in light of the increased number of corporate reorganisations taking place.