Drop comes after three consecutive years of increases
Petition filings during the first nine months of 2014 in the Cayman Islands have fallen to the lowest point in the past seven years, according to a report by law and fiduciary firm Appleby.
The analysis took account of four classes of petition filings including compulsory winding up petitions, petitions for conversion of voluntary liquidation to court supervised liquidations, schemes of arrangement and capital reductions.
The number of winding up petitions fell during the period after three consecutive years of increases and is now reflecting the level of activity seen before the start of the financial crisis and in 2011 and 2012 when the initial impact of the crisis had diminished, Appleby said.
“What we are seeing is demonstrative of improving market conditions that have given investors opportunities to exit long-standing investments without recourse to formal insolvency processes,” said Appleby’s Cayman-based litigation and insolvency partner Tony Heaver-Wren.
“This trend has developed notwithstanding the fact that many of the claims that might be investigated and asserted by liquidators against service providers are approaching limitation periods and will soon become statute barred.”
In an earlier report, the firm had expected that the spike in insolvency petitions filed in the Cayman Islands in 2013 might be the start of “a new wave of shareholder activism” this year. However, this has not proven the case as the number of winding up petitions dropped significantly not only in Cayman but also in Bermuda, the British Virgin Islands, Guernsey and the Isle of Man. Only Mauritius showed an increase in filings.
As portfolio realizations have improved amid a rise in secondary market activity, investors are more focused on new investments, rather than litigation to recoup losses sustained in historic investments.
Appleby said the statistics indicate a strong correlation between trends in the Cayman Islands and those seen in other offshore jurisdictions. Compulsory winding up petition filings in most offshore jurisdictions fell, on average, by 31 percent in the first three quarters of 2014 compared to the same period last year.
In the Cayman Islands, the number of filings of petitions for conversion from voluntary to court supervised liquidations has also fallen dramatically, down by 47 percent.
Schemes of arrangement were the only category of petition filings that continued to rise, by about 25 percent, so far this year.
The interim report on 2014 petition filings tracked winding up petitions filed in six offshore jurisdictions and four classes of petition filings in the Cayman Islands during the first three quarters of 2014, in advance of a full year multi-jurisdiction review and analysis that will be published in early 2015.