New law boosts offshore business

(CNS):  The Cayman Islands Monetary Authority has confirmed that Appleby is the first law firm in the Cayman Islands to utilise the “merger provisions” for two CIMA registered mutual funds following the amendment of the Cayman Islands Companies Law in April of this year. Until the changes a Cayman company could only combine with another company by way of “arrangement” which required the parties involved to apply to the Grand Court for approval. This Certificate of Merger signifies the first CIMA registered mutual fund structure to make use of the amendment.

It was issued by the Cayman Islands Registrar of Companies to Appleby’s client on 3 August 2009.

The new legislation makes a distinction between a “consolidation” and a “merger”. In a merger, one company remains as the surviving entity, having in effect absorbed the other merging parties that are then struck off and cease to exist.  By comparison, in a consolidation, a new entity is formed from the combination of each participating company. The participating companies, as a consequence, cease to exist and are eachstruck off by the Registrar of Companies.

The funds lawyer involved with the transaction was associate, Andre Ebanks who explained that during these turbulent economic times, investment managers are constantly seeking ways to restructure their investments and the structures that lie beneath.  “This new legislation allows companies to combine without the need to go through a potentially costly court-driven process or, as Cayman mutual fund companies have done in the past, a somewhat cumbersome transfer process; involving a subscription-in kind, redemption, transfer of assets and the liquidation of the terminating fund,” he said. “The provisions allow greater flexibility whilst providing clients with the benefit of reduced costs and time as the merger of the terminating fund and surviving fund is effected by operation of law.”

Bryan Hunter, Partner and Cayman Corporate and Commercial Practice Group Head said the revision to the Companies’ Law which was driven by the private sector had been long overdue.  “Feedback has been great and we have already been instructed by other clients to merge or consolidate companies,” he added.  “We expect to see a significant number of clients using these new provisions in the near future not only in the funds arena but in all areas of Cayman corporate law.”