Key trends in offshore dispute resolution

What were the major developments in the Cayman market in 2020?
How has COVID-19 affected court timetables for disputes work?
What trends are emerging in the market?

What were the major developments in the Cayman market in 2020?

While not necessarily related to COVID-19, 2020 saw a number of changes in the offshore market, with the global trend being towards increased regulation and supervision. For the Cayman Islands, that trend was particularly noticeable in the economic substance regime and new legislation requiring the registration of a large proportion of fund vehicles. Like other major international financial centres, the Cayman Islands has engaged fully in relation to the changes, publishing and updating guidance notes and posting FAQs and practice notes for the benefit of investors.

In relation to insolvency work, there has been a recent increase in winding-up petitions, in many cases as precursors to applications to place companies into provisional liquidation for the purposes of effecting a plan of reorganisation. At the same time, shareholder disputes (often in the context of joint ventures) and commercial litigation with an element of fraud appear to be increasing in number.

Many international clients have been affected by the COVID-19 pandemic, which in some cases has delayed or interrupted discussions around restructuring of groups of companies where site inspections and in-person meetings have been unable to take place.

How has COVID-19 affected court timetables for disputes work?

Notwithstanding the day-to-day challenges faced by many clients as a result of the pandemic, the Cayman courts have remained fully operational and busy. The Cayman courts are used to videoconference hearings and have transitioned smoothly to having all matters conducted virtually with electronic court filings and temporary concessions made in certain areas, such as the filing of hard copy documents.

Now that the Cayman Islands is out of lockdown, hearings are being conducted in person again where possible but with the flexibility to allow advocates to appear via Zoom where appropriate. One positive to have come from the pandemic is the legacy of e-filing and e-bundles, which are likely here to stay.

What trends are emerging in the market?

There will be opportunities in the market around assets which have been devalued as a result of the COVID-19-induced economic downturn. These may include:

• opportunistic purchases;
• take-privates of listed companies whose shares are unappreciated by the market; and
• the securitisation and work-out of underperforming loan portfolios.

Structured finance continues to be an exciting area, with investors open to creative ways to make a return in the low interest rate environment.

An increase in applications to effect restructurings with the assistance of the Cayman court is expected as attempts to agree consensual terms with creditors in some cases encounter difficulties. Increased scrutiny of financial statements and compliance will likely lead to an increase in litigation with a view to recovering assets placed beyond the reach of creditors and/or measures being pursued by creditors to introduce independent insolvency professionals to protect their interests in the event of an insolvency.

In addition to these areas, there is a great deal of press coverage about the potential for US-listed companies with operations in Asia to delist and either be taken private or seek an alternative listing. This is already resulting in a rise in dissent actions, where existing shareholders unhappy with the valuation underpinning the transaction can seek to have the fair price for their shares determined by the court.

Elsewhere there continues to be strong demand for corporate capital raising, which touches upon many practice areas – bank lending, refinancing, bond issues and initial public offerings (including special purpose acquisition companies). As corporates seek to bolster balance sheets, this trend will likely continue. There is also likely to be more opportunistic private equity M&A (public and private) given the amount of available 'dry powder' in the market.

For further information on this topic please contact Marc Kish at Ogier by telephone (+1 345 949 9876) or email (marc.kish@ogier.com). The Ogier website can be accessed at www.ogier.com.