Restoring a Company to the Register: What Creditors Need to Know

Introduction

When a company is struck off the Register of Companies in the Cayman Islands, that company may leave behind creditors with few options to recover an outstanding debt. However, there is a legal route available to creditors to restore a company and pave a way for enforcement action. This article outlines the process and key considerations involved in restoring a company to the Register for the purposes of debt recovery.

What is Strike Off?

A strike off, also known as a dissolution, is the process of formally closing down a company and removing it from the Registrar of Companies. A strike off can happen for a number of reasons – most commonly it is initiated by the Registrar of Companies due to a company failing to file its annual returns or pay annual fees.

This effectively results in the company no longer existing as a legal entity, such that any debts owed by the company are extinguished, and no legal claims can be brought against it. Any assets held by the company at the time of the strike off will also ordinarily vest in the Cayman Islands’ Government. For these reasons, directors of companies unable to pay their debts as they fall due may actively neglect to file annual returns or pay filing fees in the knowledge that the company will be stuck off the register.

Restoration Application

A creditor may apply to restore a company to the register under section 159 of the Companies Act (As Revised).

The timing of the application is crucial:

• Within 2 years of strike off, a creditor can apply to the Grand Court for an order to restore a company.
• Between 2 and 10 years after strike off, a creditor may still be able to apply, but only with the prior written consent of the Cayman Islands’ Cabinet.

Before filing an application, the creditor must also obtain the prior written consent of the Registrar of Companies.

The Grand Court will make a restoration order if:

• The company was trading or operational at the time of the strike off; or
• It is, for some other reason, ‘just’ to restore the company to the register.

Once restored, the company is deemed to have continued in existence as if it had never been struck off. This means the company’s directors would ordinarily be reinstated and all the assets which vested in the Cayman Islands’ Government would re-vest in the company.

Combining Restoration with Liquidation

Often, creditors seeking restoration also apply to place the company into an official liquidation and appoint liquidators at the same time pursuant to Order 102, rule 18 of the Grand Court Rules. This dual process ensures that there can be an orderly wind up of the company’s affairs and prevents the directors from regaining control of a company with unresolved liabilities.

A winding up petition would usually be sought on the grounds that the company is unable to pay its debts and/or on the basis that it is just and equitable to wind up the company pursuant to sections 92(d), 92(e) and 94 of the Companies Act.

The petition would need to be served on the company’s last known registered office address and the Registrar. It would also need to be advertised in the Cayman Islands Gazette and potentially other relevant jurisdictions in which the company conducted its business.

The petition would be supported by:

• An affidavit verifying the contents of the petition; and
• An affidavit from any proposed official liquidators confirming their consent to act.

If you are a creditor wishing to explore this route and require further guidance or support, a member of our team would be happy to assist you – please contact us at info@mcgrathtonner.com or here.