![]() ![]() Section 146 provides that every disposition of property made at an undervalue by or on behalf of a company with intent to defraud its creditors shall be voidable at the instance of its official liquidator, whereby: The principal difference is that, under the former, a disposition is only set aside to the extent necessary to satisfy the obligations owed to the relevant creditor (plus costs), whereas there is no such limitation under Section 146. That being the case, the intention behind the introduction of the Section was therefore “to put the liquidator in the same position as the creditors.” Īs a result, there is a great degree of overlap between, on the one hand, Section 4 of the Fraudulent Dispositions Act, and on the other hand, Section 146 of the Companies Act. In relation to dispositions at an undervalue specifically, the review also noted that whereas the Fraudulent Dispositions Law provided a remedy for creditors of companies prejudiced by undervalue dispositions, the effectiveness of that remedy in the insolvency context was limited by the fact that a liquidator would not fall within that definition. That review had found that the law which existed at the time was unduly complex because it was derived from a combination of 19 th century legislation, inappropriate foreign rules and local case law. Section 146 was introduced in 2009 alongside a swathe of other changes intended to give effect to recommendations made by the Law Reform Commission in its April 2006 review of Cayman’s corporate insolvency law. Origins of Section 146 of the Cayman Islands Companies Act This article considers the avoidance of dispositions at an undervalue under Section 146, with a particular focus on the origins of the provision and how the expression “intent to defraud” is likely to be construed. In Volume 18 (2021) of this publication, the authors analysed the operation of Section 145 and the consequences of its application: see Transaction Avoidance in the Cayman Islands Insolvency Context: Voidable Preferences under s145 of the Companies Act. They concern voidable preferences (under Section 145), dispositions at an undervalue (under Section 146), and fraudulent trading (under Section 147). Those provisions are to be found in the Cayman Companies Act. ![]() In the Cayman Islands, as elsewhere in the common law world, there are transaction avoidance provisions enshrined in statute that are designed to preserve, so far as possible, an insolvent debtor’s available assets, in order that they may be distributed to creditors fairly on an equal footing. ![]()
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