Members’ Schemes of Arrangements in the Cayman Islands No Longer Must Satisfy the ‘Headcount Test’
By Alex Davies, Partner, and Mauricio Da Rocha, Associate, Conyers
From August 31, 2022, members’ schemes of arrangement pursuant to section 86 of the Companies Act of the Cayman Islands have not been subject to the “headcount test” being met, bringing further certainty to the process.
The amendment to section 86 of the Companies Act was gazetted on October 21, 2021, and came into effect on August 31, 2022, abolishing the headcount test in members’ schemes of arrangement, typically used to privatize companies or as an alternative to the Cayman merger process. As a result, companies contemplating a members’ scheme of arrangement now only require the approval of 75% in nominal value of the members, or class of members, present and voting either in person or by proxy at the requisite scheme meeting and no longer require the majority in number of members to approve the scheme. Creditors should keep in mind that the headcount test for creditors’ schemes of arrangement has not been abolished and will need to be satisfied to implement a scheme. A new section 86(2A) of the Companies Act now provides:
If seventy-five per cent in value of the members or class of members, as the case may be, present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the members or class of members, as the case may be, and also on the company or, where a company is in the course of being wound up, on the liquidator and contributories of the company.