With the recent publication of the annual costs of a company incorporated in the Cayman Islands ("Company") indicating significant increases for 2025 [General Registry Fee Changes To Take Effect] now is the time to decide if you still need that Company as the deadline to bring it to an end is 31 January 2025. If you decide to terminate the Company, action should be taken immediately to get rid of it before the 2025 annual fees are incurred. There are two routes to achieve this, and both involve a series of requirements that take time to complete.
The two ways a solvent Company can be dissolved are (i) voluntary liquidation or (ii) a strike-off. When contemplating the winding up and dissolution of a Company it is important to consider the procedure for and effect of the two processes.
Voluntary liquidation
Voluntary liquidation is a straight-forward process that is well-honed and is the only way to ensure that any future liability for officers, directors and other stakeholders in the company is eradicated. Dissolution by this process is highly recommended for a Company that has engaged in trade, operations, or commercial transactions throughout its life cycle but really makes sense for all Companies. Once voluntary liquidation is completed there is no way for the Company to be brought back through reinstatement, except in very limited circumstances.
The process for a voluntary liquidation takes 2-3 months and the fees involved are between US$7,500-15,000 (depending on the law firm and liquidator involved and the nature of the Company's business). The Cayman Islands Government and Cayman Islands Gazette (the "Gazette") advertising fees range from US$3,000-4,000 are payable in addition.
At Bedell Cristin we can take care of the whole process once all the required resolutions and other documents are signed and closing accounts provided and for a no asset/no liability Company legal fees would not exceed US$8,000. Below is a brief guide to what is involved:
- directors of the Company will sign a declaration of solvency confirming the solvent financial position of the Company and will recommend to the shareholders that the Company be placed in voluntary liquidation and pass any necessary resolutions;
- shareholders pass special resolutions putting the Company into voluntary liquidation and appoint the voluntary liquidator;
- notify the Registrar of Companies (the "Registrar") of the voluntary liquidation and the appointment of the voluntary liquidator(s);
- publish a notice of the voluntary liquidation and appointment of the voluntary liquidator(s) in the Gazette;
- file notice of the final general meeting in the Gazette;
- appointed voluntary liquidator(s) will collate the final financial statements of the Company indicating how the assets have been distributed and prepare a report of the voluntary liquidation for the shareholders;
- voluntary liquidator(s) hold the final general meeting and the shareholders sanction the actions of the voluntary liquidator(s);
- voluntary liquidator(s) notifies the final general meeting to the Registrar and request for the Certificate of Dissolution; and
- Certificate of Dissolution is issued (usually within 7 days although the deemed legal dissolution of the Company will take a further 3 months).
Strike off
Some companies who are no longer carrying on business or cease operations choose to dissolve the Company through asking that the Company be struck off the Cayman Islands register of companies. The process for a strike off takes up to 3 months, as a Company will only be struck off as at the end of a calendar quarter (March, June, September and December) and fees involved are between US$5,000-7,000 (depending on the law firm involved). Cayman Islands Government fees in the range of US$2,000-3,000 are payable in addition. Below is a brief guide to what is involved:
- directors will pass a resolution that the Company has no assets or liabilities and is in a solvent financial position, no actions have been taken which would impact the application for strike off, that the Company has ceased trading and that a director will swear an affidavit in support of the application for strike off;
- one director swears an affidavit containing the information about the Company contained in the resolution;
- application is made to the Registrar for strike off; and
- if satisfied, the Registrar will issue a Certificate of Strike Off on the next quarter date.
Using strike off for dissolution carries the risk that, for a period of up to ten years after the strike off, creditors, shareholders or other claimants can revive the struck off Company by applying to the court for reinstatement, even if only to seek satisfaction of a claim. Claims could include claims against directors and officers of the Company. The court will not give too close a scrutiny of the merit of any claims said to exist so there is a danger that the reinstatement process may be used to seek to achieve some kind of leverage over those who were involved in the Company.
Decisions, decisions!
The primary difference between a strike off and voluntary liquidation is that a Company which is struck off can be restored for up to ten years so directors can be exposed to the possibility of claims for that long.
Unless the Company has been owned and controlled by the same person and was used to hold an asset of a type in which there could never be liability, a voluntary liquidation dissolution buys total peace of mind for those involved in the Company at a very modest additional cost compared to a strike off dissolution.
For further detailed advice on our liquidation and dissolution services, please do not hesitate to contact the listed contacts.
