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22 April 2021
Against the backdrop of differing economies, laws and regulations throughout Asia, choosing to incorporate Cayman entities into holding and investment structures allows international stakeholders to cooperate under the aegis of a stable and effective judicial system. Appeals from the Grand Court lie with the Court of Appeal, which comprises judges who have held high judicial office in the Commonwealth. The Judicial Committee of the Privy Council is the final appellate court for the Cayman Islands. As such, through its court system, the Cayman Islands can provide the investment community with impartial, established and highly regarded judicial resources dedicated to resolving complex commercial disputes.
Minority shareholders have at their disposal common law and statutory rights which may be deployed in circumstances where directors have breached their fiduciary duties, including the right to:
Company shareholders may be able to commence proceedings in a personal capacity directly against the company. The right being enforced must be a personal right conferred on the individual in their capacity as shareholder and the matter about which the shareholder complains must not be a mere procedural irregularity but must arise from the company's breach of its articles of association (its statutory contract with its shareholders). The Cayman courts have, for example, held that a shareholder may bring a personal action against the company where the directors have allotted shares for improper purposes.
A fiduciary relationship exists between a company and its directors. In general, a director's fiduciary duties are owed only to, and can be enforced only by, the company; this means that the company (not its shareholders) is the only proper plaintiff in an action where the company is entitled to relief – this is known as the 'rule in Foss v Harbottle'. The rule, which takes its name from the English case of Foss v Harbottle ( 2 Hare 461), has been applied repeatedly in the Cayman Islands.
To prevent directors from stifling legal proceedings in respect of their wrongdoing, the common law has developed exceptions to the rule in Foss v Harbottle. As a result, Cayman law allows for shareholders to bring proceedings in the name of and on behalf of the company. Two of these exceptions are:
The courts have jurisdiction to order the winding up of a company on a shareholder's petition if they believe that it is just and equitable that the company be wound up. The words 'just and equitable' have long been considered by the English and Welsh and Cayman courts to have a wide and general meaning to be taken at face value. Consistent with this, it is not possible to state the categories of circumstance in which Cayman companies may be wound up on the just and equitable ground exhaustively. However, instances may include:
Under the Companies Act, the courts have jurisdiction to make orders in the alternative to a winding up. Such orders include:
For further information on this topic please contact Oliver Payne, Edwin Gomez or Ryusuke Bushimata at Ogier by telephone (+852 3656 6000) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Ogier website can be accessed at www.ogier.com.
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