When and on what basis does the Court grant powers to official liquidators in Cayman Islands liquidations?

Two recent decisions by the Grand Court of the Cayman Islands – Re UNUMX (in voluntary liquidation) [2025] CIGC (FSD) 15 and Re SIN Capital (Cayman) Limited [2025] CIGC (FSD) 18 – have emphasised the need for insolvency practitioners to provide sufficient evidence when seeking permission to exercise powers under section 110 and Part 1, Schedule 3 of the Companies Act. 

The Grand Court of the Cayman Islands (the Court) has also reiterated that it is unlikely to approve draft appointment orders that grant liquidators unrestricted "blanket authority".

Which liquidator powers require sanction of the Cayman Court?

Schedule 3 Part 1 of the Companies Act (2025 revision) (the Companies Act) prescribes certain powers that a liquidator may wish to exercise require sanction of the Court, in accordance with section 110(2)(a) of the Companies Act (Part 1 powers).

These are distinct from the powers that a liquidator can exercise without sanction, according to section 110(2)(b) of the Companies Act (Part 2 powers).

The difference between Part 1 and Part 2 powers

Part 1 powers grant, among other things:

• the power to bring or defend any action or other legal proceeding in the name of and on behalf of the company
• the power to enter into a compromise or settlement with creditors or persons claiming to be creditors and/or any party to legal proceedings brought or defended by the Company

Part 2 powers grant, among other things, the power to convene meetings of creditors and collect in the property of the company.

How does a liquidator obtain sanction for Part 1 powers?

In accordance with Order 11 of the Companies Winding Up Rules, liquidators will need to bring a sanction application during the liquidation each time they wish to exercise a Part 1 power where its use is not authorised by the terms of their appointment order. Liquidators must file evidence in support of the application to exercise a Part 1 power, whether they are seeking sanction at the time of appointment or on a subsequent sanction application.

When should liquidators obtain sanction for Part 1 powers?

Where a liquidator anticipates, prior to their appointment, that they are likely to need certain Part 1 powers, it is advisable to ensure that they are included in the winding up order. This will eliminate the need for a freestanding sanction application following their appointment.

The most common Part 1 powers needed are the power to commence recognition proceedings on behalf of the company and the power to appoint attorneys. However, there has been a tendency in recent years to include "catch-all" provisions in proposed draft orders conferring "blanket authority" on liquidators to exercise all Part 1 powers without further sanction of the Court.

In Re UCF Fund Limited [2011] (1) CILR 305 (Re UCF Fund Limited), the Court held that it would not give "blanket authority" for the exercise of Part 1 powers. The judgment also stated that any application must be based on specific circumstances or transactions in which the exercise of the relevant power(s) is appropriate and needed to be supported by relevant evidence.

This approach has been reiterated and endorsed in subsequent decisions including Re GTI Holdings Limited [2022] (1) CILR 472, Re Aubit International (FSD unreported judgment 16 October 2023) and Re Asia Innovations Group (FSD unreported judgment 10 June 2024).

When will the Court not grant Part 1 powers to official liquidators as part of the appointment order?

In Re UNUMX (in voluntary liquidation) [2025] CIGC (FSD) 15, the joint voluntary liquidators sought a supervision order to convert the voluntary liquidation into an official liquidation procedure. The draft order submitted with the application included provisions permitting the intended official liquidators to:

1. obtain recognition in other jurisdictions
2. bring or defend proceedings
3. compromise claims 

As Part 1 powers, all of these required sanction of the Court. Justice Doyle held that it was unsatisfactory for these powers to have been included in the draft order "without any attempt to justify them by reference to the evidence". He also reminded practitioners of the need to adhere to the principles set down in Re UCF Fund Limited and endorsed in subsequent decisions.

In Re SIN Capital (Cayman) Limited [2025] CIGC (FSD) 18, the petitioning creditor sought a winding up order on the grounds that the company was unable to pay its debts. The draft winding up order submitted with the petition contained two provisions, granting the joint official liquidators the powers to:

• "take any such action as may be necessary or desirable to obtain recognition of the Joint Official Liquidator and/or their appointment in any other relevant jurisdiction and to make applications to the court in such jurisdictions for that purpose"
• "carry out any act or exercise any power considered by them necessary or desirable in connection with the liquidation of the Company and the winding up of its affairs and to prevent the dissipation of the assets of the Company and its subsidiaries"

The Court acknowledged that each case must be decided on its own evidence, facts and circumstances. For example, in Asia Innovations Group Limited (FSD unreported judgment 10 June 2024) the Court was content to make an order sanctioning the power to seek recognition, the power to engage staff and the power to appoint attorneys, counsel and professional advisors. However, the Court held that on the present application it was not persuaded that it would be justified in including the two broad orders sought in the draft order.

Key takeaways for official liquidators seeking sanction of Part 1 powers

Regardless of whether the liquidator is seeking sanction to exercise Part 1 powers at the time of appointment or on a subsequent standalone sanction application, these recent decisions of the Court reinforce two key points.

First, that the guidance given in Re UCF Fund Limited must be followed. The Court will not grant "blanket authority" because it is inappropriate for the Court to authorise a liquidator to exercise Part 1 powers as it sees fit without further reference to the Court, simply on the basis that it may become appropriate to exercise such powers at a later date.

Secondly, that if sanction is required to exercise multiple Part 1 powers, the application and evidence in support must clearly demonstrate why the exercise of each power is appropriate by reference to the specific facts and circumstances of the case.

When the power for which sanction is sought requires the Court to apply a specific test, the evidence must also address that test. For example, where sanction is sought to enter into a transaction in the name of and on behalf of the company, the evidence must demonstrate that the transaction is in the commercial best interests of the company, reflected by the commercial judgment of the liquidator (see Re DD Growth Premium 2X Fund [2013 (2) CILR 371]).

Where the Court is being asked to determine the application on the papers, the evidence filed should not only address why the exercise of each power is appropriate by reference to the facts and circumstances of the case, but also the reason why it is appropriate for the application to be determined without an oral hearing.

How Ogier can help

Ogier has one of the largest Dispute Resolution teams in the Cayman Islands advising on technical, strategic and procedural aspects across the spectrum of contentious commercial disputes and insolvencies. For more information on this topic or to find out how the firm can advise you in this area, contact your usual Ogier contact or one of the authors of this article.

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