Voluntary Liquidation in Cayman: A Practical Step-by-Step Guide for Directors

Voluntary liquidation is the primary approach for directors seeking to wind down a solvent Cayman Islands company in an orderly, cost-effective manner that fully complies with Cayman law. Unlike court-ordered liquidation, voluntary liquidation is initiated by the company itself, giving directors control over timing, communications, and asset realisation. This practical guide walks directors through each stage of liquidating a Cayman company, highlighting key legal requirements and director responsibilities to facilitate a smooth, compliant wind-down.

Step 1: Confirm Solvency and Pass a Board Resolution

Directors must carefully confirm the company’s solvency, ensuring all known and contingent liabilities, plus interest, can be paid in full within 12 months from the start of liquidation.

• Convene a board meeting to pass a formal resolution recommending voluntary liquidation.
• All directors are required to sign and file a statutory declaration of solvency within 28 days of liquidation commencement, confirming a full inquiry into the company’s affairs.
• Directors should seek legal advice if there are any uncertainties or complexities in financial or contingent liability positions, as filing a false declaration is a criminal offence subject to fines and imprisonment.

Step 2: Shareholder Special Resolution

Directors must call a shareholders’ meeting or circulate a written resolution. The shareholders then pass a special resolution to wind up the company voluntarily and appoint the liquidator

• Typically, a two thirds majority is required unless the Articles of Association provide otherwise.
• Accurate documentation of all meetings, votes, and shareholder decisions is important.
• The date the special resolution passes marks the official commencement of the liquidation.

Step 3: Appoint a Licensed Liquidator

Shareholders appoint a liquidator who assumes control over the company’s affairs from the commencement of liquidation.

• While no statutory licensing requirement exists for liquidators, appointing a licensed and experienced professional or firm is best practice.
• The liquidator’s responsibilities include realising assets, settling debts, managing creditor claims, and ensuring compliance with all statutory and regulatory obligations.
• Regulated entities must coordinate necessary filings and audit obligations with the Cayman Islands Monetary Authority (CIMA), including license cancellation and ongoing communication.

Step 4: Notify Creditors and File Required Documents with the Cayman Registrar

Within 28 days of the liquidation commencing, the liquidator files key documents with the Cayman Registrar of Companies:

• The shareholder special resolution,
• Notice of voluntary winding up,
• Liquidator’s written consent to act,
• Directors’ statutory declaration of solvency.

Additionally,

• Publish the notice of liquidation in the Cayman Islands Gazette, notifying creditors and the public.
• Notify all known creditors directly, giving them at least 21 days to submit claims.
• Failure to meet these filing and notification requirements may necessitate the involvement of the court, increasing complexity and cost.

Step 5: Asset Realisation and Creditor Settlement

The liquidator manages the realisation of assets and settlement of liabilities efficiently:

• Verify creditor claims and distribute funds accordingly.
• If the company has assets or claims in other jurisdictions, local legal or forensic experts may be engaged.
• Maintain transparent communication with creditors and stakeholders throughout the process.

Step 6: Final Distribution, Filings, and Completion of Wind-Down

When all liabilities, including costs and contingent claims, have been settled:

• Distribute remaining assets to shareholders according to the Articles of Association and shareholder instructions.
• Prepare the final accounts and liquidation report.
• Hold a final general meeting with at least 21 days’ notice published in the Gazette to present the report and accounts.
• File a return of capital with the Registrar.
• The company is formally dissolved three months after the filing and removed from the register; restoration is rarely permitted post-dissolution.

Practical Tips for Directors

• Start early to plan for deadlines and avoid additional fees.
• Stay organized with detailed records of filings, meetings, notices, and creditor communications.
• Notify all creditors, including potential contingent or disputed claims.
• Engage expert advisors to handle filings, tax, accounting, and cross-border complexities.
• Close all accounts, contracts, and licenses as part of winding down operations.

By following this clearly structured guide, directors can navigate the Cayman voluntary liquidation process with confidence, ensuring legal compliance, minimizing costs and risks, and preserving their company’s and their own reputation.