How To Prepare For End-Year Cayman Islands Liquidations – Financial Services – Cayman Islands

Year-end preparations for financial firms are well underway,
with the associated deadlines coming into view. Cayman
Islands-based entities that are approaching or have reached the end
of their lifecycle should consider including a voluntary
liquidation as part of this end-of-year administration. 

To avoid incurring any unnecessary government registration fees,
companies in the Cayman Islands that are considering a voluntary
liquidation should bring on an appointed liquidator. This contact
will need either to hold the company’s final general meeting or
submit the final dissolution notice for an exempted limited
partnership on or before 31 January 2024.

In light of this deadline, please contact a liquidations
professional no later than 1 November 2023 for advice on and to
begin any on-boarding and pre-appointment requirements. 

What does a fund need to do to complete the Cayman Islands
liquidations process?

Funds seeking to deregister from CIMA will be required to
complete a final audit in most instances. Typically, in the context
of a mutual fund, the final audit will cover the period up to the
date of (i) the appointment of a third-party liquidator or (ii) the
full payment of final redemptions to investors. Funds will need to
allow for this, both in terms of the time required to prepare and
submit the audited financials, as well as the associated costs.
Failure to comply with filing requirements may bring about
sanctions from CIMA such as an administrative fine of up to
US$6,000.

What should Cayman Islands funds know about the recent changes
to the deregistration rules?

Last year, CIMA promulgated new deregistration rules for Cayman
Islands open-ended funds that fall under the purview of the Mutual
Funds Act (Revised), as well as those registered under the Private
Funds Act (Revised). These new regulations affect both the
deregistration and liquidations timelines, as well as eliminate the
ability to categorise a fund with CIMA as License under Termination
(“LUT”) or License under Liquidation (“LUL”)
status. 

For funds, the main result of this regulatory change is that a
fund’s final audit must be completed before a fund can file
deregistration documents with CIMA. A fund can be granted an audit
waiver from CIMA if need be. However, the fund needs to announce
its plans to deregister to CIMA within 21 days of making that
determination and/or appointing a designated liquidator. With the
proper documentation, the deregistration process should proceed
smoothly.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.