An original version of this article was first published in the Jersey Evening Post, January 2026. 

Identify all assets and create a schedule

It can be an overwhelming and time-consuming task to identify a person's assets once they have passed away. A helpful step that you can take to assist your executor or loved ones is to prepare an asset schedule that lists what your assets are, where they are held, how they are held (for example, in joint or sole names), giving account numbers and contacts such as any relationship manager.

It would also be helpful to check what death in service benefits and/or pension or life assurance beneficiary nominations you have, as these may be dealt with separately and not via your Will.

You should keep asset details in a safe place, perhaps with your Wills, but ensure your executor or family know where to find them or how to access them when needed.

Wills

Whether your assets are substantial or small, everybody has something and it is important to prepare a Will to ensure that your assets pass in accordance with your wishes. It is also helpful to prepare a Will to clearly set out your wishes in writing and to avoid any ambiguity or disputes about your intentions.

If you already have existing Wills, it is important to review them to check whether they still accurately reflect your wishes and your current situation.

There are many things to consider when preparing or updating your Will, such as:

• have the nature of your assets changed
• has your family grown
• have family dynamics shifted
• are there any special items you want to gift
• do you still trust the person you have appointed as your executor
• do you need to make provision for any minor children
• have any previously minor children now come of age so trust arrangements are no longer needed
• what happens to your beloved pets

If you do not prepare a Will before you die, you will die intestate and Jersey law will determine the distribution of your assets to your legal heirs – known as 'heirs at law'. Do you know who your heirs at law are and would you be happy with them inheriting your estate?

Many people assume they do not need a Will because they believe their estate will pass to their closest relative, but this may not actually be the case. For example, Jersey intestacy law gives priority to siblings over parents and also gives no rights to co-habitees or unmarried partners. 

Lasting Powers of Attorney

Lasting Powers of Attorney (LPAs) are very helpful estate planning documents which are often overlooked and seen as less important than Wills. 

An LPA is a legal document that enables you to appoint one or more people (your attorneys) to help you make decisions or make decisions on your behalf when you no longer have the capacity to do so.

There are two types of LPA: one for decisions relating to your health and welfare and one for decisions relating to your property and affairs. You are able to set out clear instructions and preferences for your attorneys to follow, allowing you to give direction as to how you would like them to act. The instructions and preferences can be tailored to your specific circumstances and can assist your attorney with making decisions in line with your personal wishes.

A health and welfare LPA will cover decisions relating to your personal health and care, such as medical care, preference of nursing homes, dietary requirements, fitness schedules etc. It also gives your attorney authority to speak to your doctors and make decisions relating to life sustaining treatment.

A property and affairs LPA relates to your property and financial affairs. It can give your attorney authority to speak to your bank, social security and the tax office, for example. This can be helpful if you need your attorney to pay bills from your account whilst you are unable to do so. This type of LPA can also give instructions about your wishes relating to the sale or rental of your property, if this is needed. 

You may also consider putting a separate Business LPA in place in which you can appoint a separate attorney to step in should you lose capacity. They will be able to make decisions relating to the continuation of the business such as paying suppliers and wages.

Business owners

If you are a director of a limited company, a partner in a partnership, or a sole trader, you must ensure that provisions are in place to enable the business to continue running should you lose capacity or die, if that is what you want.

There will likely be provisions made in the articles of association or partnership agreement, but it is important that these documents do not conflict with your Will in regard to how your business assets will pass on your death. 

Care fee planning

Care fee planning involves assessing your financial situation, understanding local authority support thresholds, and exploring strategies to fund potential long-term care costs.

For effective planning, you may wish to seek professional advice from a financial advisor or lawyer about structuring your assets. It is important to remember that asset transfers can be scrutinised if made with the intention of avoiding care fees, even if made years in advance.

Don't wait until it is too late!

Many people make the mistake of waiting until it is too late to prepare a Will or LPA. 

Too often we see people or family members trying to put a Will or LPA in place for themselves or loved ones as a matter of urgency because of declining health or lack of capacity, which can be extremely stressful.

If a person lacks capacity when trying to prepare a Will or LPA, it simply cannot be done. This is why it is beneficial, for you and your loved ones, to be organised and to prepare these documents before you need them.

How Carey Olsen can help

We understand that estate planning can be a daunting task, but it does not need to be. Carey Olsen's trusts and private wealth team can assist you with all aspects of your estate planning, whether it is preparing Wills and LPAs, restructuring assets, or just coming into our office to discuss the options available to you. We are here to help, so please do not hesitate to contact one of our experts. 

An original version of this article was first published in Issue 18 of Guernsey Property and Construction magazine, November 2025.

On 6 March 2025, the States of Guernsey approved new housing standards legislation, titled the Housing (Standards,
Landlord Registration and HMO Licensing) (Guernsey) Ordinance, 2025.

This new legislation implements housing standards and regulation for the private residential sector, representing a significant overhaul of rental housing law. Certain parts of the legislation came into force on 1 July, with the remaining parts still to be implemented.

Minimum standards for rented dwellings

The legislation provides that rented dwellings must comply with minimum standards from 1 July 2025, and separate regulations have been passed to set the specific standards to be met. Some of the key requirements include:

• Structural safety and repair: Landlords must maintain rented dwellings, building exteriors, common areas, outbuildings, and boundary structures in structurally sound and safe condition. The repair obligations on landlords apply when disrepair affects an occupier's enjoyment of the dwelling.
• Essential facilities: All rented dwellings must provide indoor access to a toilet, bath/shower, a wash basin with hot/cold water, food preparation space, two cooking hobs, and an oven. Adequate heating for living/sleeping rooms is required, with accessible controls for temperature adjustment. Landlords must also maintain utilities (electricity, gas, water, lighting), food storage facilities, postal delivery systems, and effective drainage in good repair.
• Safety standards and inspections: The legislation establishes safety requirements for rented dwellings across various areas. Electrical installations must meet the prescribed standards and undergo inspections by qualified persons every five years, with all existing properties requiring inspection by 1 January 2026 if not recently tested. Oil-fired combustion appliances require annual inspections by qualified persons, with existing appliances also subject to the 1 January 2026 deadline if overdue for testing. Landlords must also comply with existing obligations under the relevant gas and fire safety legislation.

Housing health and safety rating system

The legislation establishes a tiered enforcement system based on hazard categories, and separate regulations have been passed to set the prescribed rules. The system identifies 29 specific hazard categories including damp and mould, temperature extremes, toxic exposures, structural dangers, fire hazards, and inadequate facilities for hygiene, food safety, and water supply. The numerical scores place hazards into bands A through J, with bands A-C (scores 1000-5000+) classified as Category 1 hazards requiring mandatory enforcement action, and bands D-J (scores below 1000) as Category 2 hazards allowing discretionary enforcement.

Available enforcement tools for authorised officers include improvement notices requiring specific remedial work within set timeframes, prohibition orders restricting property use, hazard awareness notices providing information about risks, and emergency remedial action for imminent dangers.

Landlord and property registration

The legislation proposes to establish a registration system requiring all landlords to register themselves and their rental properties within 28 days of becoming landlords.

When implemented, landlords must complete specified forms with detailed information and pay prescribed fees.

Licensing for houses in multiple occupation (HMOs)

The legislation proposes to introduce an HMO licensing regime, which is also yet to be implemented.

HMOs are defined under the legislation as dwellings with more than two people from multiple households sharing basic amenities, with at least one person paying rent. All HMOs that require registration must also obtain HMO licenses, which authorise occupation by specified maximum numbers of households or persons. Landlords must apply through prescribed forms with applicable fees.

Conclusion

This new legislation represents a major change, establishing robust standards and enforcement mechanisms designed to protect tenants while providing clear guidance for landlords.

Tenants may wish to seek legal advice to understand their rights, as may landlords to know their obligations and ensure their properties remain compliant.

An original version of this article was first published in Aurigny En Voyage, October 2025.

What is tokenisation?

Tokenisation is the digital representation of traditional, real-world assets ("RWAs") – such as bonds, equities, real estate and funds – in computer code stored on a decentralised ledger (a "blockchain").

Tokenisation makes the leap to decentralisation of data, where no-one "holds" the data. The blockchain becomes a single store of information, where service providers access and manipulate the data, rather than holding it on their servers.

We think the best way to describe tokens is: "a new way of storing data, with significant technological advantages".

Permissioned tokens

"Permissioned" tokens are the key to mainstream adoption. They can only be sent or received based on verified credentials of the digital "wallets" to which the tokens are credited (Bitcoin, by contrast, can be sent to or from any wallet). This facilitates the application of mainstream compliance requirements on tokens.

For example, a token can be programmed so that it cannot be transferred to a digital wallet unless the investor's wallet satisfies specified AML requirements. In practice, a Guernsey administrator will determine whether the investor has satisfied those criteria, designate their wallet accordingly and thereby permit a transfer of the token to that wallet.

The principal benefits of tokenisation

We think the benefits of tokenisation and the "smart contracts" they can run ("smart contracts" is just another name for computer code) will be:

• Efficiency. The blockchain will be a single source of data, eliminating the need for duplicative, labour intensive and error strewn data inputting.
• Risk. The potential for instant settlement (transferring a token from one wallet to another in seconds, not days) means the elimination of counterparty risk, with less need for central counterparties and reduced collateral requirements.
• Automation. Processes currently requiring manual input will become fully automated. A classic example is capital calls sent to investors. A single data input could be made by the administrator for a drawdown amount, which gets automatically allocated to investors pro rata to their holding of tokens, deducted from their wallets and transferred to the fund's wallet – all in seconds (think of it as a very clever direct debit). The recent GENIUS Act in the US, which creates a federal regulatory framework for stablecoins (cryptocurrencies backed by stable assets like the U.S. dollar) will help legitimise the use of blockchain based payments.
• New pools of capital. The ability to "fractionalise" the tokens (break them down into smaller and smaller pieces) means smaller investment sizes, which means new investors (e.g. HNWIs and mass affluent) can access products hitherto reserved for only the most sophisticated institutions. "Feeder" funds specifically set up for such investors, with standardised investment terms, could invest into the main fund.
• Liquidity. Technology platforms – like those offered by TISE – facilitate token trading via electronic order books: an essential feature for smaller investors typically unable to hold otherwise illiquid investments for many years.

How is Guernsey placed?

Given its large funds industry and its legal and regulatory environment, Guernsey is ideally placed to benefit from tokenisation.

Our Lending, Credit and Finance Law makes clear that tokens representing RWAs are not "virtual assets" and therefore regulated in the same manner as the RWAs they represent.

Our Electronic Transactions Law and Electronic Transactions Ordinance facilitate the use of electronic documents and processes, the storage of information in electronic form and the enforceability of a contract carried out by means of an "electronic agent".

When will this happen?

It's already started! Headline grabbing examples – such as the Dubai Land Department's announcement that it had fully funded a tokenised a £0.5m property project in one minute and 58 seconds, attracting 149 investors from 35 nationalities – demonstrate the huge appetite among investors familiar with the technology.

Traditional managers are catching up, issuing an increasing number of tokenised versions of their products. There is no doubt that this area will grow exponentially in the coming years.

 

Matt Brehaut and Tom Carey are partners in Carey Olsen's corporate team in Guernsey. They specialise in the establishment of Guernsey domiciled funds, and lead the firm's digital assets team in Guernsey, working with clients to explore ways in which the island can remain at the forefront of new technologies such as tokenisation.

An original version of this article was first published in Edition 143 of the AIMA Journal, September 2025.

The Cayman Islands has long been recognised as a leading jurisdiction for investment funds, offering a robust regulatory framework while maintaining efficiency, ease of use and confidentiality. However, in line with increased global anti-money laundering (AML) and counter-terrorist financing (CTF) standards, the jurisdiction has introduced new regulations governing access to beneficial ownership information which directly affects Cayman Islands investment funds.

The Beneficial Ownership Transparency (Legitimate Interest Access) Regulations 2024 came into force on 28 February 2025 (the "LIA Regulations") together with the accompanying Guidance on Applying for Access to Beneficial Ownership Information on the basis of Legitimate Interest and for the Protection from Disclosure (the "LIA Guidance"). The LIA Guidance clarifies who can access beneficial ownership data and under what circumstances. These changes are critical for fund operators (e.g. board of directors or general partner), sponsors and investment managers, legal practitioners, and corporate service providers to understand, as they impact compliance obligations and disclosure risks.

This article examines:

• The legal framework for beneficial ownership transparency in the Cayman Islands
• Key provisions of the LIA Regulations and LIA Guidance
• Who qualifies for "legitimate interest" access?
• Practical implications for Cayman Islands funds and their advisors

1. Background: Cayman's beneficial ownership regime

The Cayman Islands has maintained a centralised beneficial ownership register since 2017, in compliance with the Global Forum on Transparency and Exchange of Information for Tax Purposes and Financial Action Task Force (FATF) standards. Until 31 December 2024, fund operators and managers could rely on exemptions from their funds or "registered persons" in maintaining a beneficial ownership register.

Substantial changes to the regime were introduced on 1 January 2025 with the Beneficial Ownership Transparency Act, 2023 of the Cayman Islands (the "BOT Act"), in particular highlighting that investment funds registered under the Mutual Funds Act (as revised) or the Private Funds Act (as revised) ("Regulated Funds") no longer benefited from an exemption and would need to either (i) appoint a contact person under the alternative route to compliance (see further below) or, (ii) maintain a register of beneficial owners.

In addition, while access to beneficial ownership information was only restricted to competent authorities (e.g., the Cayman Islands Monetary Authority ("CIMA") and law enforcement) under the previous regime prior to 1 January 2025, the Cayman Islands made a commitment to introducing publicly accessible registers of beneficial ownership information in line with the draft Overseas Territories (Publicly Accessible Registers of Beneficial Ownership of Companies) Order, prepared by the UK Secretary of State to comply with the requirement under section 51 of the UK's Sanctions and Anti-Money Laundering Act 2018. The BOT Act hinted at providing such access to members of the public (in addition to competent authorities), and the recent LIA Regulations and LIA Guidance set out the framework for certain members of the public to apply to the competent authority to request access to beneficial ownership information, relating to a Legal Person (as defined under the BOT Act). The new rules aim to prevent abuse of corporate structures while balancing privacy and legitimate business confidentiality.

2. Key provisions of the LIA Regulations and LIA Guidance

(a) Who may apply for access to the search platform and what information/documents will need to be provided for proof?

1. A person engaged in journalism or bona fide academic research;
   • Evidence of their identity and credentials, for example copies of current and valid official identification and credentials, links to published works, recent approvals obtained as a journalist or academic researcher in other jurisdictions, and other such documentation as may be requested by the Competent Authority; and
   • Evidence that the Legal Person subject to the application is linked to money laundering or terrorist financing by providing court reports, media articles, and any other documentation that evidences the link; and
2. A person acting on behalf of a civil society organisation whose purpose includes the prevention or combating of money-laundering, its predicate offences or terrorism financing; or
   • Evidence of their identity, for example copies of current and valid official identification; and
   • Evidence that the applicant is acting on behalf of a civil society organisation whose purpose includes the prevention or combating of money laundering, its predicate offences, or terrorism financing, for example copies of official identification and credentials, published details of the civil society organisation's purpose, links to the registration details of the civil society organisation, and other such documentation; and
   • Evidence that the Legal Person subject to the application is linked to money laundering or terrorist financing by providing court reports, media articles and other documentation that evidences the link; and
3. A person seeking that information in the context of a potential or actual business relationship or transaction with the legal person about whom that information is sought,
   • The nature of the potential or actual business relationship or transaction with the Legal Person, providing details of the relationship or transaction, and documentation such as those capturing details of any proposals; and
   • Evidence that the applicant is sufficiently interested in entering into a business relationship or transaction with the Legal Person, or evidence that the applicant has entered into a business relationship or transaction with the Legal Person, by including documentation such as due diligence already undertaken on the Legal Person, any contracts or other related documentation; and

In each of the above cases, a statement that access is being sought for the purposes of journalism or bona fide academic research / on behalf of the civil society organisation / in the context of a potential or actual business relationship or transaction with the Legal Person about whom the Information is sought and that the Information is sought for the purpose of preventing, detecting, investigating, combating or prosecuting money laundering, its predicate offences, or terrorist financing is also to be submitted. This statement should include details of the proposed relationship or transaction and how the Information from the Legal Person's Beneficial Ownership Register fits into that relationship or transaction.

(b) Requirement for "legitimate interest"

In each of the above cases, such person may only apply for access if there is a legitimate interest in that information for the purpose of preventing, detecting, investigating, combating or prosecuting money laundering or its predicate offences or terrorist financing.

(c) Required fee

US$37 for one legal person and US$122 for multiple legal persons.

(d) Available information on the search platform

1. For an individual
   • Name of beneficial owner;
   • Country of residence;
   • Nationality;
   • Month and year of birth; and
   • The mechanism of control they have over the Legal Person.
2. For a reportable legal entity
   • Name;
   • Registered office;
   • Legal form;
   • Registration number; and
   • The mechanism of control they have over the Legal Person.
3. For a deemed beneficial owner
   • Name;
   • Registered office;
   • Legal form; and
   • The mechanism of control they have over the Legal Person.

(e) Access restrictions

Under the Beneficial Ownership Transparency (Access Restriction) Regulations, 2024 (the "Access Restriction Regulations"), individuals (including senior managing officials) are able to apply for protection from public disclosure for a fee of US$1,200 where they believe that the disclosure of information relating to them and their association with the Legal Person, will place them, or a person living with them, at serious risk of:

1. Kidnapping;
2. Extortion;
3. Violence;
4. Intimidation; or
5. Other similar danger or serious harm.

(f) Key takeaways

1. General public access is not allowed—unlike many other jurisdictions, the Cayman Islands maintains a restricted approach especially with the Access Restriction Regulations.
2. Fishing expeditions will not be permitted—requests must be specific, evidence-based, and proportionate.
3. Journalists and activists do not have automatic access. They must prove a direct link to suspected criminal activity.
4. In general, it is expected that Regulated Funds will nominate a contact person (e.g. an administrator licensed in the Cayman Islands) to hold up to date information on their beneficial owners that can be provided to the relevant Cayman Islands authorities within 24 hours of any request, rather than maintaining a register of beneficial owners. This is on the basis that (i) beneficial ownership information is generally held by the Regulated Funds' administrator (or other licensed entity on behalf of the Regulated Fund), and (ii) only competent authorities can request beneficial ownership information from the relevant contact person.

3. Practical implications for Cayman Islands funds and advisors

(a) For fund managers

1. For Regulated Funds who elect to maintain a beneficial ownership register, other than ensuring that the beneficial ownership register is up-to-date, no proactive disclosure required unless a valid request is made.
2. Ensure nominee arrangements comply with disclosure rules if investigated.
3. Monitor foreign regulations, as some jurisdictions (e.g., EU) may demand additional disclosures from Cayman Islands funds.
4. If required/applicable, apply for protection from public disclosure.

(b) For lawyers and compliance officers

1. Advise clients on confidentiality risks when structuring ownership.
2. Prepare for increased scrutiny from foreign regulators seeking Cayman Islands ownership data.

Conclusion: A balanced approach to transparency

The Cayman Islands' recent beneficial ownership reforms strike a careful balance between transparency and privacy, ensuring compliance with global AML standards while protecting legitimate business confidentiality.

For now, the regime remains more restrictive than public registers in the EU and UK, but fund managers and advisors should:

1. Stay informed on evolving international standards.
2. Ensure robust compliance with disclosure obligations.
3. Be prepared for targeted requests from regulators and law enforcement.

As the regulatory landscape evolves, the Cayman Islands' approach may face further adjustments—particularly if FATF or OECD requirements tighten and to reflect the Cayman Islands commitment to enhancements to their beneficial ownership register, on a legitimate interest basis, with more streamlined processes for multiple search requests, including on fees, as was highlighted at the recent meeting between the UK's Minister of State for the Overseas Territories and Cayman Islands Premier in London on 17 June 2025. For now, the jurisdiction retains its appeal as a secure, well-regulated funds hub with sensible safeguards against misuse.

We regularly advise fund managers and onshore law firms on the formation and maintenance of Cayman Islands funds. Please reach out to your usual Carey Olsen contact, or one of the contacts listed here, if you require further guidance in relation to the above.

Q: Steven, can you tell us a bit about your background and what drew you into crypto?

A: I started my legal career in London, later qualifying in New York. I moved to Bermuda in 2008, initially for personal reasons but stayed for the career opportunities. My legal background and experience is as a corporate M&A lawyer with a focus on international structuring, but with a technology focus.  In 2016 I started to learn about blockchain technology and when the Premier of Bermuda returned from Davos promulgating the idea of Bermuda becoming a leading digital asset jurisdiction I enthusiastically rolled up my sleeves and volunteered to contribute. Since then, I’ve helped Bermuda develop a progressive digital asset regulatory framework, securing licenses and supporting projects like Mountain Protocol (acquired by Anchorage), XBTO, Hashkey and Open Eden. Bermuda’s long history in financial services and (re)insurance made it a natural evolution for digital finance and risk management.

Q: How does Bermuda’s digital asset regulatory framework differ from those of other offshore jurisdictions, such as the Cayman Islands or BVI?

A: Bermuda, the Cayman Islands, and the British Virgin Islands (BVI) each provide robust regulatory environments for digital asset businesses, with similar common law principles yet distinct approaches tailored to different target markets. Bermuda’s Digital Asset Business Act (DABA) is probably the only fully comprehensive framework, providing clear legal and regulatory certainty and licensing opportunities for the broadest range of blockchain activities, including tokenisation, stablecoin projects, issuance, selling and redeeming of digital assets, custodial services, brokers, market makers, trustee services, exchanges, derivative exchanges, payment services using digital assets and lending or rehypothecation services. 

Jurisdictions that introduced a Virtual Asset Service Provider (VASP) regime following FATF’s determination in 2019 to include such activities within the global standard for AML/ATF compliance provide a less comprehensive list of licenced activities. Each jurisdiction has its strengths, with Bermuda distinguished by its broad, all-encompassing yet principles based regulatory approach.  The question of choice comes down to whether you want all of your activities to be regulated and does a particular regime recognise certain types of legal arrangements, like DAOs, or the specific use of blockchain technology critical to a given project.

Q: How does Bermuda support both startups and large firms?

A: Bermuda’s tiered licensing regime under the DABA provides a flexible and scalable regulatory framework that supports both institutional-grade businesses and early-stage innovators. From Class T licences for people seeking to beta test their project infrastructure in the real market, through Class M sandbox licenses for companies seeking to scale, up to Class F for fully operational firms like Coinbase, Kraken, and Circle, the framework allows companies to test, launch and scale within a regulated environment where application of regulatory oversight is proportionate to the nature, scale and complexity of the projects themselves..

Q: How does Bermuda’s legal framework address asset protection?

A: This is where Bermuda really stands out. We built legal structures specifically designed to segregate and protect customer assets. You can structure a token with:

• A trust model
• A Segregated Account Company (SAC)
• Or an SPV + Purpose Trust, like in a traditional securitization transaction

These give legal certainty, insolvency protection, and redemption rights. In other words, if something goes wrong with the company itself, customer assets are protected from company creditors.

Q: What does Bermuda’s first tokenized bond signify for on-chain capital markets?

A: It shows Bermuda’s readiness for serious capital markets innovation. The issuance demonstrates how structured, governed digital debt can thrive under Bermuda law, paving the way for yield-generating stablecoins and hybrid digital securities backed by traditional assets.

Q: Who is building in Bermuda today?

A: We’re working with a diverse range of blockchain and fintech firms, including RWA tokenisation, digital asset custodians, digital asset and digital asset derivative exchanges, tokenized funds, and stablecoin issuers to name a few. These clients value Bermuda’s regulatory credibility and global scalability.  Having been regulating the sector for almost 8 years, the BMA has a dedicated fintech team that understand the technology, the unique risks and the business opportunities that are coming down the pipeline and so, with global credibility, can manage sophisticated applications within a matter of months not years.  This speed to market mixed with credible regulation is very attractive to those with legitimate and pre-funded projects.

Q: As MiCA takes effect, how does Bermuda’s approach to digital asset regulation stack up?

A: MiCA brings clarity and access to the EU market, but commentators have publicly criticized it for being too restrictive, especially for stablecoins, which as an example must hold reserves within the EU. Bermuda offers more flexibility, allowing reserve assets to be held globally, focusing on risk and transparency rather than geography. Its adaptable regulation also makes Bermuda attractive for projects seeking agility.  Whilst a Bermuda licence does not grant access to the EU market, it does provide a much broader array of products and services capable of servicing “rest of world” jurisdictions (i.e. those jurisdictions where it is not otherwise illegal or prohibited to offer such services without a local licence)..

Q: What impact are you seeing from the recent shifts in the US regulatory landscape?

A: There’s clear momentum in the US, especially following the change in administration and with new legislation like the GENIUS Act. The US wants to assert leadership in digital assets but, as always, the devil is in the details. Implementation will take time, and there’s still uncertainty around timelines and enforcement. In the meantime, Bermuda offers a clear, trusted framework that’s already applying globally recognised standards from a risk management, corporate governance and compliance perspective, making it a practical jurisdiction for projects that want to move now rather than wait.

Q: Where does Bermuda fit in the global landscape?

A: Bermuda is becoming the go-to jurisdiction for projects seeking clarity and regulatory robustness today. With over 70 years as a trusted hub for (re)insurance and global finance, Bermuda has extended that reputation through a pioneering approach to digital asset regulation. It’s one of the few offshore jurisdictions recognized by the US, UK, and EU as meeting high compliance standards in its existing (re)insurance sector which lends credibility to how it approaches digital assets. 

The Bermuda Monetary Authority continues to lead with innovation, including testing embedded compliance in DeFi, where smart contracts carry real-time regulatory logic. This blend of credibility, flexibility, and forward-thinking makes Bermuda uniquely positioned in the global digital asset landscape.

If you're considering setting up a project or want expert advice, reach out to Steven, Carey Olsen Bermuda for guidance.

An original version of this article was first published in IFC Review, July 2025.

The modern family office has a plethora of structuring options available to it for owning and deploying a family's wealth. This article will explain one of the most popular available in Guernsey, as a well-regulated international financial centre of good standing. This structure is available for all family offices, whether based in Guernsey or not.

• Non-charitable Purpose Trust: A non-charitable purpose trust is precisely what the name suggests – a trust set up for non-charitable purposes. Traditionally, the law only allowed trusts for the benefit of objects (ie natural and legal persons) and charitable purposes. However, under Guernsey statute, it is possible to create a non-charitable purpose trust. In this typical structure, the purpose of the trust is to hold the shares in the private trust company so that they are not owned by an individual and therefore subject to inheritance issues or other concerns that may arise from individual ownership. Commonly, the trustee of this trust is a regulated Guernsey fiduciary. The enforcer (the person whose role it is to ensure the trustee adheres to the terms of the trust) is often the principal family member or a trusted member of the family office staff.

• Private Trust Company (PTC): This is a normal limited liability Guernsey company established to act as the trustee of discretionary or reserved power trusts for the benefit of the family served by the family office. Usually, a company acting as trustee by way of business from or within the Bailiwick of Guernsey must be regulated in Guernsey. "By way of business" includes receiving a fee for services even if there is no profit motive. However, a PTC is able to apply for an exemption from licensing if it will only act as the trustee of trusts for the benefit of a specific family, and the administration of the PTC as trustee will be conducted by a regulated Guernsey fiduciary services provider. The advantage of using a PTC over a ‘normal’ regulated fiduciary is that it permits the family to determine who will be the directors and thus have day-to-day control of the trusts. By having a Guernsey fiduciary services provider act as the administrator, the directors can be sure they will be guided on how to exercise the company's fiduciary powers correctly, and the administration of the trusts will be properly managed. Certain records can also be maintained by the family office, providing a degree of privacy for the family.

• Trusts: Trusts in Guernsey are created and administered under the Trusts (Guernsey) Law, 2007. In the family context, there are usually two types of trust that are established for the benefit of the family. These are discretionary trusts and settlor-reserved trusts:

  • A discretionary trust gives the trustees (the PTC in this example) wide powers to administer the assets of the trust and to distribute them at their discretion to the beneficiaries, ie family members. This provides the trustees with flexibility to adapt to the changing needs of beneficiaries over time. The settlor may guide the trustees’ exercise of their discretions by providing a letter of wishes. The settlor may update their letter of wishes over time. Whilst not legally binding, the letter of wishes sets out how the settlor would like the trustees to manage the trust property. It is normal for trustees to carefully consider the settlor’s wishes in their administration of the trust, and rare for the trustees to depart markedly therefrom. This is particularly so in the case of a PTC where the settlor may sit on the board and/or have chosen their key advisers and trusted members of the family office staff to sit on the board. While the directors must ensure the PTC acts in accordance with its fiduciary duties, they will have a deep understanding of the settlor's rationale for establishing the trusts, and his precise wishes in relation to them.

  • Settlors may retain certain powers over the trust or trust property when they create a trust, such as the power to give binding directions to the trustees in relation to the investment of the trust fund, the power to vary or amend the terms of the trust, the power to remove a trustee, and the power to change the proper law of the trust. Reserved power trusts are often used where a settlor is a successful businessperson and would like to remain actively involved in the management of a business following its settlement on trust. Powers may be reserved in any kind of trust, but care should be taken to ensure that no adverse tax consequences arise as a result. A discretionary trust refers to how the trustees may exercise their dispositive powers (ie that they may exercise them at their discretion for the benefit of any beneficiary). By contrast, a reserved powers trust refers to the level of control or oversight the settlor retains in respect of the administration of the trust and its assets.

In the above example, a separate trust has been established for different branches of the family as well as for charitable purposes (see further below).

• Charitable Trust/Foundation: Most families have philanthropic goals they wish to achieve, and some establish separate philanthropic vehicles for this purpose. A charitable trust can either be established to benefit specific charities and/or specific or general charitable purposes. An alternative to a trust in any context is a foundation. Guernsey's foundation law allows for the establishment of foundations, the advantages of which are that they have separate legal personality and allow for disenfranchised beneficiaries. A disenfranchised beneficiary is one who has no right to any information about the foundation and cannot request the Court's assistance to obtain that information. A foundation must have a registered agent in Guernsey. Where there are disenfranchised beneficiaries or where the foundation is established for purposes, it must have a guardian whose role is to enforce the terms of the foundation in good faith and ‘en bon pere de famille’ (like a good father to his family). 

• Limited Liability Partnerships: Guernsey has three different types of partnerships – general (ie ‘normal’ partnerships in which all partners have unlimited liability), limited (in which the limited partners have limited liability and the general partner has unlimited liability), and limited liability partnerships. This last category of partnership is a legal person with unlimited capacity. It may be formed for any lawful purpose, and carries on business and owns assets in its own name. It must have at least two members (who need not be equal partners), and must have a written agreement to govern the relationship between the members of the LLP itself. The advantage of an LLP over a company for Guernsey tax purposes is that an LLP is transparent. This means all income, gains, and losses, are passed through to its members. The names and addresses of the members of the LLP must be notified to the Guernsey Registrar of Companies, but there is no requirement to file profit-sharing or other account details. In the family structure context, this means it is a useful vehicle for co-investing with third parties.

• Protected Cell Companies: If the trustee wishes to invest in different assets in different proportions for the benefit of only the trusts of which it is trustee, it could consider using a protected cell company (PCC). The PCC must fall into one of several regulated classes in Guernsey or be administered by, for example, someone with a fiduciary licence. The Guernsey Financial Services Commission must provide its prior written consent to the incorporation of the PCC. The assets of each cell must be kept separate from the assets of the core and from each other. However, the assets may be collectively invested, provided they remain separately identifiable. Third parties must be informed of the specific cell with which they are dealing. If the directors of the PCC fail to do this, they are personally liable to the third party. Thus, this structure provides a great deal of flexibility for investing between branches of the same family.

• Private Investment Fund: In the example in this article, the fund is a separate vehicle although it could be a cell within the PCC. Guernsey has a flexible regulatory framework for funds involving multiple investors and multiple assets, provided there is no public offering. This includes allowing for regulatory approval within 24 hours, no limit on the number of investors, no requirement for a prospectus or disclosure document, and no requirement for a Guernsey manager (although the legal entity of the fund still has to comply with its regulatory requirements).

This and other structuring options available from Guernsey provide maximum flexibility for family offices serving the needs of ultra-high net worth families. The structures are robust, service providers are well-regulated, and Guernsey is an internationally recognised international financial centre, meaning family offices can have peace of mind because their principals are well-protected.

This article first appeared in the Bermuda Business Review 2025-2026 in June 2025.

The global demand for improved and increased digital infrastructure capacity, resilience, speed and reliability continues to accelerate and with that comes the need for collaboration and trust between the legislature, regulators and industry to ensure entrepreneurial vision and investment can flourish. We are, as a species, at a pivotal point in our history as advanced technology, including artificial intelligence (AI) and blockchain, is revolutionising the way we engage, communicate and conduct business. To adapt to these modern-day challenges successfully, Bermuda has sought to maintain a healthy balance between the freedom to innovate and the need to protect through legal and regulatory constructs. If implemented well, appropriate law and regulation can provide certainty to innovators and investors and contribute towards their success.

With innovation comes risk and Bermuda's position as the world's risk capital has made it uniquely well placed to establish an environment that recognises this and has the expertise to help foster a growth mentality.  Bermuda has used decades of globally recognised legal and regulatory risk management experience to introduce some of the most advanced laws and regulations designed to encourage innovation in the information and communication technology (ICT) sector, which is a necessary foundation for the development of digital finance.

Through collaboration between Government, the regulators (including the Bermuda Monetary Authority (BMA) as the financial regulator and the Regulatory Authority (RA) as the utilities regulator) and industry stakeholders − including industry groups and interested organisations like Bermuda's Business Development Agency (BDA) − Bermuda has created an economic and regulatory ecosystem that promotes investment in projects that benefit from effective regulatory implementation and oversight that is proportionate to applicable risks.  The result being sustainable and equitable economic growth, diversity and prosperity.

Bermuda’s Digital Asset Business Act 2018 (DABA) and Digital Asset Issuance Act 2020 (DAIA) govern the conduct of digital asset businesses and token issuances in and from Bermuda and have for the last seven years provided the legal certainty and regulatory clarity for digital asset businesses to thrive without fear of disproportionate or uncertain regulatory and legal oversight and interference.

DABA and DAIA were designed to combat the risk of fraud, money laundering and terrorist financing through the provision of digital asset products and services, as well as to ensure business resilience to negative market forces and black swan events. Together they cover the full breadth and depth of products and services available in the sector, making them one of the most comprehensive digital asset business regimes in the world. A key component of the approach taken by Bermuda is that the DABA and DAIA are sector specific and expressly carve out digital asset business products and services, including all types of digital assets, from the existing traditional financial regulatory regimes. This is done by identifying the regulatory principles and standards as are applied to traditional finance and applying them to the activities conducted by digital asset businesses, taking into account the unique and novel attributes of the technology itself.

DABA is also capable of promoting innovation through the availability of different classes of licence. A Class T licence allows a person to 'test' their proposed products, services or platform with the level of regulatory requirements proportionate to the nature, scale and risk of their business. A Class M licence is a 'sandbox' that allows a tested project to scale from start-up to a mature professional services company. A Class F licence is a full licence and is available to those businesses that have already tested and scaled their projects and are now looking to operate at the highest levels of professional corporate conduct and risk management. By treating digital asset businesses as financially regulated institutions, Bermuda has created an environment that attracts institutional grade investment and participation whilst also building the necessary trust between the existing financial sector participants and the new digital asset players.

Bermuda's digital asset regulatory 'sandbox' was so successful that the concept was broadened and introduced to all regulated sectors. These 'sandbox' regimes encourage innovation within regulatory boundaries and provide an environment for the refinement and evolution of digital technologies and infrastructure systems.

Recognising that the digital economy needs advanced physical infrastructure, the Bermuda Government has also introduced several initiatives to ensure Bermuda can provide and benefit from the appropriate legal and regulatory environment to attract investment in subsea cabling, satellite and renewable energy projects. The Submarine Communications Cables Act 2020 (SCCA) is just one example, which was rewarded by Google's decision to establish a major cable landing station in Bermuda that would form part of its new trans-Atlantic subsea cable network and a major piece in Google’s global mesh network project. Google’s design has been recognised as the new standard for fibre-optic cable infrastructure and will form the foundation for future growth in the digital economy by ensuring improved resilience and speed for digital connectivity and communications as well as meeting the increasing demand for capacity.

The SCCA provides protection for both the ocean environment and the subsea cables themselves, as well as providing critical certainty about where and how companies can implement a cable landing project. This additional infrastructure has given Bermuda reputational capital in its commitment to developing a technologically attractive environment for both physical and digital infrastructure projects.

Bermuda's Government, regulators and industry working groups have not stopped, with more localised projects constantly being developed. Working groups have been established to consider and make recommendations for innovative new laws designed to recognise complex legal concepts like decentralised autonomous organisations and applying established concepts to new challenges like the implementation of digital ID. Other projects include the development of legal structures to meet regulatory criteria around digital asset custody and the principles of tokenisation.

Bermuda has already illustrated how its approach to innovation and technology can drive improvements in efficiency, promote problem solving and increase participatory value and experience through greater system resiliency and risk management, which − with smarter oversight and automated checks and balances − can result in a reduction in human error.

The Bermuda Monetary Authority (BMA) has also sought to push the boundaries of regulatory capabilities by establishing innovative projects that consider the future of regulation in a digital and potentially autonomous financial world. In 2025 they invited applications for decentralised finance projects to participate in the development and testing of embedded regulation which could provide instantaneous and constant regulatory oversight and transparency in projects that are designed to be autonomous from any form of central control. 

With such a positive approach, it is no surprise that Bermuda has also attracted international business to its shores through the quality of conferences hosted on Island. The latest being the Bermuda Digital Finance Forum (BDFF), hosted by SALT, DAIS and Penrose in May 2025 and which provided the opportunity for thought leaders, innovators, the Bermuda Government and regulators in digital finance to gather on Island to examine, discuss and even test digital financial applications through live activations. These included a USDC airdrop to every attendee by the conference organisers, use of self-custodial wallet infrastructure and a live local vendor market where everything could be purchased using USDC received in the airdrop. These activations were aimed at giving attendees real experience in use case examples of digital finance and will help promote the development of new and innovative digital solutions that could reduce friction, increase trust and deliver on improved user experience.

For anyone who has attended a digital finance or digital asset business conference in Bermuda, it won’t come as a surprise to learn that distributed ledger technology (DLT) and artificial intelligence (AI) are just two examples of digital technologies that are already being tested, recognised and deployed in Bermuda by both technology and traditional financial service companies.

Other projects include the development of innovative web3 products and services linked to insurance pools that focus on addressing the challenges of pricing and appropriate insurance products for the digital asset sector, as well as the integration of stablecoins, with the stability and efficiency of regulated service providers, into digital asset payment and custody solutions. It has also been announced that the Bermuda Government is actively supporting the development of digital finance infrastructure projects that will provide Bermuda residents and businesses with the ability to pay for public services and government fees using approved stablecoins.

Whilst these collaborative projects involving both the public and private sectors inspire much excitement for the digital landscape ahead, they will still face new challenges as they grapple with the granular details typical of build and implementation projects. With the benefit of the infrastructure and environment afforded by Bermuda's innovative legal and regulatory regimes, those who choose Bermuda as their home for innovation will no doubt see faster and more resilient solutions to these challenges.

While the Cayman Islands has been the “gold standard” for fund raising over many decades, the landscape is evolving, and managers are increasingly being exposed to alternatives such as the British Virgin Islands (BVI) and Hong Kong’s own domestic offering - Open-Ended Fund Company (OFC).

In this joint article, Carey Olsen Hong Kong managing partner Michael Padarin and head of investment funds at Charles Russell Speechlys Hong Kong, Gaven Cheong, set out a brief overview of the Cayman Islands, BVI, and Hong Kong fund regimes. A comparison is then made across these three jurisdictions based on some of the more important criteria for managers when considering their structuring choices.

Cayman Islands Exempted Company

The Cayman Islands is a premier jurisdiction for investment funds, with over 12,900 mutual funds and 17,300 private funds registered as of March 2025. The Exempted Company structure is highly favoured for its flexibility and tax-neutral status, making it ideal for hedge funds targeting global investors. Its advantages include global recognition, a robust regulatory framework overseen by CIMA, and support for complex fund structures. However, the higher setup and ongoing costs compared to other jurisdictions (which have seen material increases over the years) have caused more cost-sensitive investment managers to actively explore alternatives, particularly as fund-raising becomes more challenging and managers seek to trim their start up costs. 

BVI Professional Fund

The British Virgin Islands (BVI) offers multiple different regulated fund types, including the Professional Fund structure, which is popular among sophisticated investors. As of 2024, there were 866 Professional Funds registered, with the total number of active mutual funds reaching 2,139 by end of 2024. BVI funds benefit from a business-friendly legal environment, low setup and ongoing costs, and tax neutrality. The other pros include fast establishment times, commercial-friendly but robust financial regulatory regime, and cost-effectiveness in fund establishment and maintenance, making it attractive for smaller or mid-sized funds. The cons are that global institutional investors are slightly less familiar with the BVI route compared to Cayman, which might affect its appeal for investment managers targeting an institutional investor base.

Hong Kong Open-Ended Fund Company (OFC)

Hong Kong's Open-Ended Fund Company (OFC) regime, introduced in 2018, has seen the establishment of 554 OFCs as of April 2025. The OFC structure is designed to be cost-effective and flexible, catering to both local and international investors. While the OFC is meant to “mirror” many of the characteristics and mechanisms found in the Cayman corporate structure, it is hampered by its less established track record, and potentially higher regulatory oversight and restrictions. Geo-political issues over the past few years have also dampened enthusiasm for the OFC, although with the introduction of an SFC-administered government grant scheme (covering 70% of set up costs for private OFCs, originally up to a maximum of HK$500,000, but reduced to HK$150,000 from April 2025) which has recently been extended to year 2027, the OFC has seen a boost in its popularity particularly among PRC managers.

Comparison table between Cayman Islands, BVI, and Hong Kong fund structures

The table below outlines the key differences between the Cayman Exempted Company operating as a Mutual Fund, BVI Professional Fund, and Hong Kong OFC, providing a clear reference for choosing the optimal structure.

Category	Cayman Exempted Company	BVI Professional Fund	Hong Kong Open-Ended Fund Company (OFC)
Regulatory oversight	Regulated by CIMA under the Mutual Funds Act. Annual audits, AML compliance mandatory.	Regulated by BVI FSC; for professional investors (≥$100K investment or professional investors). Annual audits, AML compliance required.	Regulated by SFC under the Securities and Futures Ordinance. Mandatory registration, annual audits, AML compliance. Must appoint a licensed investment manager.
Setup costs*	∼$5,889 (CIMA registration fee ~$4,482, CIMA application fee ~$366, government incorporation fee ~$854, government fees and duties ~$187,).	∼$7,775 (FSC registration fee ∼$2,050, company incorporation fee ∼$1,000, BVI registry filing fee ~$925, registered office and authorised representative fee ~$3,000, economic substance declaration ~$350).	∼$1,282–$1,332 (SFC registration fee ∼$611, Companies Registry incorporation fee ∼$389, business registration fee ∼$282).
Ongoing costs**	∼$8,126/year (Annual government fee ~$1,128, CIMA annual fee ∼$4,482, CIMA FAR filing fee ~$366, annual registered office fee ~$ 2,150).	∼$5,375/year (FSC annual renewal fee ∼$1,200, BVI registry annual fee ~$550, economic substance annual declaration ~$350, annual registered office and annual authorised representative fee ~$3,000).	∼$50–$100/year (Companies Registry annual return fee ∼$13, potential minor SFC filing fees ∼$38 for specific changes).
Time to establish	∼3–4 weeks (incorporation: 1–3 days; CIMA registration: 2–4 weeks). Excludes time for drafting fund documents by legal counsel.	∼3-4 weeks (incorporation: 1–2 days; FSC approval: 2–4 weeks). Excludes time for drafting fund documents by legal counsel.	∼3–4 weeks (incorporation: 5–7 days; SFC approval: 15–20 days, processed concurrently). Excludes time for drafting fund documents by legal counsel.
Investor appeal	High: Globally recognized, preferred by institutional investors (US, APAC, Middle East). Robust infrastructure.	High: Attracts sophisticated investors, but strong recognition amongst Asia-based investors.	Moderate: Growing recognition in Asia, but less familiar to global institutional investors compared to Cayman.
Scalability	Excellent: Supports growth from small to large scale, and caters for diverse investment strategies. Easy to list on exchanges.	Good: Suitable for small to large- sized funds and supports diverse strategies.	Good: Flexible for open-ended structures, supports diverse strategies. Limited by HK’s newer fund regime.
Tax benefits	No corporate, capital gains, or withholding taxes. Tax-neutral jurisdiction.	No corporate, capital gains, or withholding taxes. Tax-neutral jurisdiction.	Profits tax exemption for OFCs investing in qualifying assets. Subject to HK profits tax otherwise.
Beneficial ownership confidentiality	High: No public disclosure of investors/directors. Enhanced privacy laws.	High: Privacy for professional investors, no public filings.	Moderate: No public investor disclosure, but SFC requires manager/director details. Less robust privacy laws than Cayman/BVI.
Structuring options	Standalone: Yes, widely used for single-strategy funds. Master-Feeder: Yes, common for accessing diverse investor bases (e.g., US, APAC, Middle East). Supported by CIMA. Umbrella/Protected Cell: Yes, Segregated Portfolio Companies (SPCs) registered under Part XIV of the Companies Act provide statutory segregation of assets/liabilities between portfolios, ideal for multiple strategies.	Standalone: Yes, straightforward for professional investors. Master-Feeder: Yes, supported under SIBA, though less common than Cayman. Umbrella/Protected Cell: Yes, SPCs incorporated or registered under Part VII of the BVI Business Companies Act provide statutory segregation of assets/liabilities. Less prevalent than Cayman SPCs.	Standalone: Yes, standard for private OFCs. Master-Feeder: Yes, feasible with SFC approval, often used for Asian/US investors. Umbrella/Protected Cell: Yes, umbrella structures with sub-funds under Part IVA of the SFO and OFC Rules provide statutory segregation of assets/liabilities, minimizing insolvency risks. Foreign courts may not recognize segregation.
Ease of amendment of fund terms and filing requirements	Moderate: Amendments to fund terms (e.g., offering memorandum) require board approval, investor consent for material changes. CIMA notification/filing needed for key changes (e.g., directors, auditors). Annual filings include audited financials, FAR form.	Moderate: Amendments need board approval, investor consent for significant changes. FSC notification required for updates. Annual filings include audited financials, compliance return.	Low-Moderate: Amendments require board approval, investor consent for material changes, and SFC approval for key updates (e.g., offering documents). Annual filings include audited financials, compliance reports. More stringent SFC oversight.
Recommended use case	Open-ended hedge funds targeting global institutional capital, growth, and diverse strategies, especially with complex structures like SPCs.	Open-ended hedge funds targeting sophisticated investors (potentially also those interested in the virtual asset related sector), balancing cost and flexibility, with simpler or mid-sized structures.	Open-ended hedge funds focused on Asian markets, leveraging HK’s financial hub status, or requiring a licensed manager, with straightforward or umbrella structures.

* "Setup costs" refers to government registration fees and does not include costs charged by service providers (such as professional fees).

** "Ongoing costs" excludes service provider costs such as registered office, fund administration, and audit fees.

Conclusion

Choosing the right fund structure depends on your strategic priorities. The Cayman Exempted Company remains the preferred choice for managers targeting global institutional investors, offering unmatched recognition and regulatory reliability, though at higher costs. The BVI Professional Fund provides a cost-effective alternative with strong privacy and flexible structuring options, ideal for sophisticated investors and managers active in the virtual asset related sector. The Hong Kong OFC, with its low ongoing costs and regional appeal, suits managers focused on Asian markets or those leveraging Hong Kong’s financial hub status. By weighing the criteria above, managers can select a structure that aligns with their fund’s goals and investor base in a way that optimises their fundraising prospects, and their ability to maximise investor returns.

For more information on BVI and Cayman Islands fund structures, please get in touch with Michael Padarin.

For more information on Hong Kong OFCs, please get in touch with Gaven Cheong. 

This article first appeared in the Financial Times in May 2025, as part of Guernsey Finance's fund series.

As fundraising conditions remain challenging, there has been a growing interest in bespoke strategies – particularly single-asset ("deal-by-deal") arrangements and co-investments. Offering strategic flexibility, speed-to-market and cost efficiencies, these structures have become increasingly common across both private equity and venture capital markets – especially for new/emerging managers. We expect this trend to continue as a return to "peak fundraising" might still be a couple of years away.^[1] 

Deal-by-deals

Deal-by-deal arrangements allow investors to commit capital to individual transactions rather than a traditional blind pool fund. Each deal is assessed and approved separately, giving investors greater control over their exposure.

As the leading legal adviser to Guernsey’s investment industry^[2], we see deal-by-deal structures being utilised in a number of ways:

• continuation vehicles: extending the holding period for assets once a flagship fund enters its termination period, thereby providing liquidity for exiting investors and a longer runway for value creation for continuing investors;
• warehousing: where an immediately available asset is acquired ahead of the launch of a flagship fund (usually when the launch of the fund is delayed) and the asset is subsequently transferred to the flagship fund;
• first timers: persistent illiquidity has meant some investors have become more selective about the managers they invest in (limiting their appetite for new managers); so, given their smaller tickets, deal-by-deals present a good opportunity for new managers to create relationships with new investors; 
• assets that cannot be accommodated within a main fund, whether due to capacity constraints, investment restrictions or otherwise;
• syndication of a desirable asset amongst a smaller group of investors; and
• key investors requesting bespoke arrangements through which they can invest, outside of the fund structure.

Co-investments

Co-investments can be structured via single-asset syndications, aligning closely with the deal-by-deal model. The key distinction is that co-investments enable investors to participate alongside a lead sponsor - such as a flagship fund - in a specific deal or series of deals. This approach provides co-investors with direct exposure to select opportunities, typically without incurring the full fee burden associated with traditional fund structures, whilst ensuring that deal execution remains efficient.

Over the past decade, co-investors have participated in 30% of all global private equity deals according to PitchBook data^[3]. This trend has accelerated as sponsors seek fresh capital sources.

Benefits

The key advantages of these alternative structures can be summarised as follows:

• Alignment. Deal-by-deal strategies require sponsors to raise capital for each transaction, ensuring a focus on high-quality assets. Co-investments allow investors to participate on the same terms as the sponsor, fostering shared interests and a deeper, strategic relationship between investors and managers. Indeed, more and more LPs consider co-investment rights as an essential factor in selecting managers.
• Tailored risk management and diversification. By leveraging both models, investors can diversify across different sectors, geographies and strategies on selective basis. This enables them to complement their existing fund commitments without the constraints of a lock-in period and, where relevant, gain exposure to larger transactions.
• Flexibility. Investors have the freedom to choose which deals to participate in, avoiding unwanted exposure to underperforming assets or those misaligned with their investment strategy.
• Cost efficiency. Given the increased scrutiny on fund expenses and fees, deal-by-deal arrangements and co-investments are often structured without or with reduced or bespoke management fees, enhancing net returns.
• Fund restrictions. For sponsors, co-investing provides an opportunity to deploy capital into attractive assets that may otherwise be subject to investment restrictions due to concentration limits.

Regulation

Single-asset vehicles are not regulated as collective investment schemes in Guernsey, making them well-suited to most deal-by-deal and co-investment structures. As a result, neither the vehicle itself nor the entities managing those vehicles will need to obtain any licenses or approvals in Guernsey. 

Where a vehicle has multiple investors and multiple assets - such as broader co-investment structures - Guernsey offers a flexible regulatory framework. 

The private investment fund ("PIF") regime provides a fast and cost-effective route to market.  Key features of PIFs are:

• Regulatory approval in 24 hours;
• No limit on the number of investors;
• No limit on the number of persons to whom interests may be offered (although PIFs must not be the subject of an offering to the general public);
• No requirement for a prospectus or disclosure document;
• No requirement for an audit;
• No requirement for a Guernsey manager.

Where the PIF does have a Guernsey manager, such manager can benefit from the availability of a “PIF-only” investment management licence, with light-touch regulation (no conduct of business rules apply, nor are there capital adequacy or audit requirements for such licensees).

Flexibility in structuring

Guernsey vehicles, including companies and limited partnerships, can be established on a same-day basis – sometimes in as little as 15 minutes – making them ideal for time-sensitive transactions.  Protected cell companies can establish a new cell (to raise funds and hold investments on a segregated basis) by a simple board resolution.

Unlike some jurisdictions, Guernsey does not require notaries, apostilles or special stamps for corporate actions. This enables efficient decision-making and execution, ensuring a smooth and cost-effective process. 

Conclusion

Alternative investment strategies offer a tailored approach, allowing investors to engage selectively while benefiting from Guernsey's well-established financial ecosystem.

This article first appeared in Aurigny's En Voyage magazine, June 2025.

Stability and agility. Experience and innovation. Opportunity and growth. These aspects of Guernsey are well known, and I would make the case for one more.

For an economy to be firing on all cylinders, it is not just the legal framework for deal-making that is important. Investors, businesses and individuals need to know that when there is a problem, it can be solved properly, fairly and swiftly.

It is the Court system, the judges and Guernsey's array of legal practitioners that provide much of this dimension.

From the Bailiff through to the hardworking Court administration staff, Guernsey's Courts have dealt with significant and sizeable cases that would draw attention even amongst the biggest cases of London's Commercial and Chancery Courts. Furthermore, the roster of Advocates across the jurisdiction is impressive, being a role that, for those with an English background, combines the work of a 'solicitor' and 'barrister'. 

Qualifying as an Advocate is a rigorous process, involving three key requirements. An 'Aspirant' will first qualify as a solicitor or barrister in England & Wales, Northern Ireland or Scotland. Generally, they will then study with the Université de Caen Normandie and pass oral examinations to obtain the 'Certificat d'Etudes Juridiques Françaises et Normandes'. Finally, they must pass the extremely rigorous Guernsey Bar Exams.

The range of firms and quality of practitioners in Guernsey is a testament to the hard-fought and continuous problem-solving capability of its adversarial system – which is supported by this demanding process of qualification, as well as Guernsey's close links with the English Bar and the UK judiciary. Indeed, from the Royal Court, appeals are heard by the Court of Appeal (whose judges include eminent King's Counsel, as well as judges from the courts of the other Crown Dependencies and the Bailiff), followed by the Judicial Committee of the Privy Council.

Carey Olsen's dispute resolution team is consistently ranked as 'Tier 1' in both major legal directories, and has leading Advocates across all aspects of its practice. The team:

• Currently acts in a leading regulatory case that may significantly impact the regulatory enforcement process here in Guernsey;
• Successfully acted in all three Court appeals of decisions by the Guernsey Competition and Regulatory Authority;
• Advised the liquidators in relation to the largest liquidation-related claim passing through the Guernsey Courts in recent times; and
• Acts in many of the key trust-related cases.

Guernsey must continue to fire on all cylinders, and, in a time of global transformation, a jurisdiction that can offer innovation and opportunity – alongside stability in the form of a mature and robust legal system – is a very attractive place to conduct business. As Guernsey's reputation continues to grow worldwide, this important consideration should not be underestimated.

An original version of this interview was first published by Financier Worldwide, May 2025. 

While these developments pose significant challenges, they are not the only sources of concern for investors. The growing integration of artificial intelligence (AI) into fund management brings both opportunities and risks. 

Against this backdrop, Financier Worldwide turns to Jarrod Farley, who leads the Carey Olsen Cayman Islands investment funds team, as well as heading the wider corporate group in the Cayman office. He has extensive experience of advising on the formation and ongoing legal and regulatory issues relating to Cayman investment funds and has served on a number of related industry boards in the Cayman Islands.

Could you describe your approach to tackling complex legal challenges? What principles or philosophies guide your work?

As an offshore corporate and funds lawyer, I am often asked to help brainstorm complex transaction structures during sessions with onshore lawyers and clients. I have found the key in these situations is to stay calm and work through the problem from first principles. While it is ultimately necessary to understand all the various regulatory and other issues that may come to bear, it is generally the more fundamental legal issues that will determine if a structure works or not. Where the answer is no, there are often alternatives available, some of which may require taking a step back even further to see what the client is trying to achieve to be able to work out all the options. My approach here has always been to explain to clients where particular options fall on the spectrum of risk so we can work out solutions based on their risk appetite.

Reflecting on your career, how have your goals and aspirations evolved over time? Have there been any unexpected achievements or shifts in direction?

Like most offshore lawyers, I started out on the standard onshore career track, training in a large London law firm and having a fairly blinkered view of my future. At that time, I believed that my success would be measured in how quickly I rose through that firm’s ranks to become partner. However, as I progressed and found it ever harder to achieve any balance between work and personal life, I questioned my priorities and decided to move to the Cayman Islands for a complete change. At the time, the jurisdiction was taking off as the home of alternative fund and structured finance vehicles, so I was able to continue my career progression to partner but also spend quality time with my growing family. My biggest shift came when I was offered the chance to help found a Cayman Islands office for Carey Olsen, which at the time was still only based in the Channel Islands. This was an entirely new and exciting challenge taking me well outside my comfort zone, which I discovered was really what I needed at the time.

How do you stay ahead in your field? Are there any emerging trends or innovations you are particularly excited about in your area of expertise?

After we founded Carey Olsen’s Cayman Islands office in 2012, there followed a decade of intense regulatory change driven by international forces outside our control, from FATCA and CRS, to data protection regulations, beneficial ownership registers and private fund regulation. I generally found myself leading the charge against this onslaught, trying to understand what each change meant for us and our clients and working out the practical and legal responses. Aside from being forced to adapt to all this imposed regulation, recent years have brought client-driven changes in the digital assets space, leading to an entirely new practice area that over time I feel is going to have an effect on almost everything we do.

Representative engagements

• Representing an emerging US private credit manager alongside US counsel on a $4bn fund launch in 2024.
• Advising a TASE-listed Israeli real estate manager on a £65m fund established with a joint venture partner to invest in UK real estate.
• Acting as lead counsel for a family office with $1bn assets under management and a global client base, on the establishment of a fund with multiple investment strategies structured as a segregated portfolio company.
• Acting for a US institutional fund manager on the establishment of an investment programme for one of its large US public pension fund clients. Each segregated portfolio company has a separate trading manager and portfolios that are separately managed accounts or intermingled with third-party investors so the pension fund can manage its exposure.
• Establishing a single investor fund for a decentralised autonomous organisation to manage its unreleased tokens held in treasury, which are worth several billion dollars.

 

This article first appeared in The Alternative Investor, May 2025. You can sign up to receive the monthly publication here. 

The dominance of the Cayman Islands in the offshore funds market is due to a combination of its tax neutrality, proximity to the United States and bespoke fund legislation and regulatory regime that have continuously evolved to meet market demands. Additionally, the jurisdiction’s appeal as a stable British dependency with a judicial system underpinned by English common law is fundamental.

Tax neutrality is one of the most significant advantages. The jurisdiction does not impose corporate, income, capital gains or withholding taxes on investment funds or their investors. Consequently, investors can manage their tax obligations in their country of tax residence and are not subject to multiple layers of taxation.

The Cayman Islands are dedicated to upholding the highest international standards and practices, including compliance with the OECD's common reporting standard and the requirements set by the Financial Action Task Force. The jurisdiction has also established a comprehensive legislative framework to combat money laundering, terrorist financing and proliferation financing. These robust regulatory measures enhance investor confidence, making the Cayman Islands an attractive jurisdiction for both investors and fund managers.

Most investment funds in the Cayman Islands are regulated by the Cayman Islands Monetary Authority ("CIMA"), which issues rules and guidance to regulated funds to ensure compliance with global standards while maintaining a business-friendly environment. CIMA's aim is to achieve a sound financial system for the Cayman Islands that meets international standards and supports sustainable growth, development and resilience. The jurisdiction provides a flexible framework for investment managers underpinned by rules and guidance that require specific disclosures to investors, ensuring funds operate within a solid legal structure that protects investors while allowing flexibility for innovative fund structures.

Various entities can be used to structure investment funds, including: (i) exempted companies; (ii) exempted limited partnerships; (iii) segregated portfolio companies; (iv) limited liability companies and (v) unit trusts. Exempted companies and segregated portfolio companies are commonly used as open-ended funds, while closed-ended funds are typically structured as exempted limited partnerships. Limited liability companies are a relatively recent innovation, ideal for parallel funds that wish to replicate the terms of a US LLC; while unit trusts are primarily used for investors in particular jurisdictions where other types of vehicle suffer tax or regulatory disadvantages.

Given the number of investment funds established in the jurisdiction, there is a sophisticated network of professionals operating in the Cayman Islands including lawyers, accountants, auditors, administrators and fiduciary service providers ensuring that fund managers have access to expert services.

For all these reasons, the Cayman Islands remains a popular choice for investment funds.

 

An original version of this article was first published by The Hong Kong Lawyer, April 2025. 

British Steamship Protection

In British Steamship Protection, the Singapore Court of Appeal addressed three key questions:

1. whether Bermuda liquidation proceedings (Bermuda Proceedings) were brought under a law relating to insolvency or adjustment of debt and collective in nature so as to qualify as "foreign proceedings" under Article 2(h) of the Singapore Model Law (SG Model Law) (the First Question);
2. whether the Bermuda Proceedings should be recognised as a foreign main proceeding under Article 17(2) of the SG Model Law on the basis that the company's centre of main interests (COMI) was in Bermuda at the relevant time (the Second Question); and
3. whether recognition of the Bermuda Proceedings was against Singapore's public policy (the Third Question).

The First Question

The Court of Appeal first had to decide if (i) and (iii) of the five cumulative requirements [3] set out in Ascentra Holdings, Inc (in official liquidation) v SPGK Pte Ltd [4], summarised below, were satisfied for the Bermuda Proceedings to be considered "foreign proceedings" under Article 2(h) of the SG Model Law:

1. the proceedings are collective in nature;
2. the proceedings are a judicial or administrative proceeding in a foreign state;
3. the proceedings are conducted under a law relating to insolvency or adjustment of debt;
4. the property and affairs of the debtor company are subject to control or supervision of the foreign court in that proceeding; and
5. the proceedings are for the purpose of reorganisation or liquidation.

Were the Bermuda Proceedings collective in nature?

Following Ascentra Holdings, proceedings are considered collective in nature if:

1. they "concern all creditors of the debtor generally"; and
2. "substantially all of the assets and liabilities of the debtor are dealt with in the proceeding, subject to local priorities and statutory exceptions, and to local exclusions relating to the rights of secured creditors".

Here, joint provisional liquidators (JPLs) had been appointed by the Bermuda Court with full powers, which included, inter alia, the power to bring and defend proceedings, carry on the company's business, raise security, do all such other things as may be required to wind up the company's affairs and distribute its assets, conduct investigations to secure assets, determine the company's liabilities and do such act under the Bermuda Companies Act as was required to be done by a liquidator.

The winding up order also empowered the JPLs to "act in the same manner as liquidators on matters concerning creditors and to deal with substantially all of the assets of the Company".

The Court of Appeal concluded that these wide-ranging powers (which are typical in offshore liquidations, whether they be in the Cayman Islands, BVI or Bermuda) pointed squarely to the Bermuda Proceedings being a collective process.

Were the Bermuda Proceedings conducted under a law relating to insolvency or adjustment of debt?

The Court of Appeal endorsed the "Broad Approach" expounded in Ascentra Holdings that a proceeding would be considered one conducted under a law relating to insolvency or adjustment of debt "as long as the law or relevant part of the law under which the relevant proceeding is conducted includes provisions dealing with the insolvency of a company or adjustment of its debts". It found that the Bermuda Proceedings were such proceedings as they were brought under sub-sections of section 35 of the Bermuda Insurance Act which concern the winding up of Bermuda licensed insurance companies, of which the company is one.

The Court of Appeal accordingly found that the Bermuda Proceedings were a "foreign proceeding" within the meaning of Article 2(h) of the SG Model Law.

The Second Question

A finding that the Bermuda Proceedings were a "foreign main proceeding" under Article 17(2)(a) of the SG Model Law would mean that relief under Article 20 of the SG Model Law would be automatic. A contrary finding (i.e., that the Bermuda Proceedings were a "foreign non-main proceeding") would mean that only discretionary relief under Article 21 of the SG Model Law would be available.

Foreign proceedings will be recognised as foreign main proceedings if they take place in the debtor's COMI. As determining COMI generally involves an assessment of factors which indicate to those who deal with the debtor, especially creditors, where any insolvency proceedings concerning the debtor would be commenced, the starting (rebuttable) presumption is that a debtor's COMI is its place of registration. This presumption may be displaced by other factors.

The overarching point made by the appellants was that the company's COMI was not Bermuda because its insurance business and operations were conducted outside of Bermuda. They argued that the company was "effectively a shell".

The JPLs argued otherwise saying, inter alia, that the company was registered under the Bermuda Insurance Act as a Class 2 Insurer and was subject to the supervision of and regulation by the Bermuda Monetary Authority. It was obliged both to appoint a principal representative and to maintain statutory records in Bermuda, which it did. The JPLs further argued that little or no weight should be given to the factors raised by the appellant because the company's non-compliance with Bermuda legislation was what had caused its downfall and having regard to those factors would be to endorse a breach as a means of circumventing the company's true COMI (i.e., the place where it was licenced to carry on its business).

The Court of Appeal agreed with the JPLs. The starting position was what the company's business was established as a business carrying on regulated activities in Bermuda. It was licensed to carry on business "in and from within Bermuda". As its sole business was its insurance activities, it was subject to the regulatory regime under the Bermuda Insurance Act and required to comply with statutory obligations for that purpose. Pursuant to the terms of its license, it was not permitted to carry on insurance activities outside of Bermuda. Insofar as the company carried out insurance activities outside of Bermuda in breach of its licence, the Court of Appeal found that these activities were not relevant in assessing COMI, and that it would be plainly wrong to allow an errant company to benefit from a breach of its statutory obligations.

With the touchstone for the assessment of COMI being the perception of third parties, especially creditors, as to where a debtor would open primary insolvency proceedings, the relevant factors pointed to Bermuda being the company's COMI.

The Third Question

The appellants sought to argue that the JPLs had failed to protect the interests of creditors by commencing the recognition application and incurring excessive costs, and it was against Singapore's public policy to grant the JPLs the orders sought.

The Court of Appeal rejected those arguments and found that those points had nothing to do with the integrity of the Bermuda Proceedings, the consequences of granting the relief sought or the conduct of the JPLs in the application. The JPLs could not sensibly be seen to be acting against the interests of creditors when they had been authorised by the Bermuda Court to bring the application as foreign representatives. Accordingly, the public policy exception in Article 6 of the SG Model Law was not engaged.

In the Matter of Bull's-Eye Limited

In In the Matter of Bull's-Eye Limited, BVI Court appointed liquidators sought recognition and assistance from the Hong Kong Court, inter alia, to take control of the company's assets in accounts maintained with various banks and securities firms in Hong Kong.

The Hong Kong Court reiterated the principles espoused in Re Global Brands [5], namely, that it would recognise foreign insolvency proceedings if: (1) the foreign insolvency proceedings are a collective insolvency proceeding; and (2) the foreign insolvency proceedings are opened in the company's COMI.  Where (2) does not apply and the foreign insolvency proceedings are taking place in the company's place of incorporation, the Hong Kong Court may grant recognition and assistance if either (1) it is limited to recognition of a liquidator's authority to represent a company and the orders sought are incidental to that authority, i.e., "managerial assistance"; or (2) a liquidator requires recognition and carefully prescribed assistance as a matter of practicality.

The Hong Kong Court found that, as a matter of private international law, matters of internal management and authority to represent a foreign company are determined by the laws of its place of incorporation. Limited recognition and assistance may thus be granted based on the need for managerial assistance as the foreign officeholders are the duly authorised agents of the company and as such entitled to act on its behalf, including to cause the company to instigate an action to advance or protect its interests.

The Hong Kong Court made it clear that limited recognition and assistance falling outside the ambit of "managerial assistance" may also be granted where, for practical reasons, it is necessary, so long as the interests of the forum (i.e., Hong Kong) are not adversely affected by the foreign order. The Court should lean towards recognition in these circumstances. It did not, however, indicate in what circumstances the interests of the forum would be affected by a foreign order.

As for the scope of the assistance to be granted, it should be: (1) limited to enabling the foreign officeholder to perform acts which they are empowered to undertake under the law by which they were appointed, (2) necessary for the performance of their functions, and (3) consistent with the substantive law and public policy of the assisting Court. Assistance is not available for purposes which are properly the subject of other schemes.

The Hong Kong Court noted that it had previously provided a standard form recognition order as a guide, and the standard form empowered foreign officeholders, inter alia, to bring legal proceedings and request and receive information concerning the company. Additionally, where assets are in Hong Kong, a recognition order would enable the foreign officeholders to take possession of or deal with the same.

On the facts of the case, the Hong Kong Court granted the BVI appointed liquidators recognition and assistance as (1) the company maintained accounts with various banks and securities firms in Hong Kong such that recognition was necessary to enable the BVI appointed liquidators to take possession of those assets, (2) the balance of the powers sought by the BVI appointed liquidators were substantially similar to those set out in the standard form order, and (3) the assistance sought was consistent with their powers under BVI law.

Comment

These two important recent cases focus on some essential aspects of cross border insolvency. The Singapore decision reinforces the principle that the point of embarkation for any analysis of COMI must be the place of incorporation of the company, even if there are other compelling factors. The Hong Kong Court's decision helpfully restates the position where offshore appointed liquidators are seeking to recover and protect assets in Hong Kong and concludes that assistance should be granted within certain parameters. Both cases are excellent illustrations of why it is crucial for the onshore and offshore lawyers to cooperate and work closely together in securing the overall objective.   

An original version of this article was first published by STEP Journal, Issue 2, March 2025. 

In Al Thani v Al Thani, the UK Privy Council ("the Privy Council") was asked to consider whether British Virgin Islands (BVI) company legislation treats the shares in a company registered in the BVI as immovable property and, therefore, subject to the laws of the BVI in determining the validity of a testamentary instrument for effecting the transmission of those shares on the death of the owner.

An original version of this article was first published by The Royal Gazette, February 2025.

Introduction

Many jurisdictions have introduced or are in the process of introducing formal structures for the regulation and governance of decentralised autonomous organisations ("DAOs"). However, such organisations have proved to be a challenge for legislators and regulators due to the way in which they are created and are intended to operate.

Bermuda is known for being a forward-thinking jurisdiction when it comes to financial innovation. The Bermuda government introduced a sector specific legal and regulatory framework in 2018 that provides a fully comprehensive licensing regime for all types of digital asset business, including many activities conducted by DAOs.

Since the launch of the original DAO, the Eris platform in 2016, DAOs have gained popularity as alternative structures for collaborative and sometimes financially focused digital communities. Whilst DAOs have been launched for many different purposes, there is a noticeable focus on access to digital financial opportunities. For example, many of the DAO structures already established manage digital wallets that contain digital assets for project funding.

What is a DAO?  

DAOs are a type of organisation that operates on distributed ledger technology, allowing it to function without the need for a centralised authority. DAOs are governed by smart contracts, self-executing contracts with the terms of the agreement directly written into code. They can be used for a variety of purposes, including managing funds, making decisions in a decentralised manner, and facilitating collaborations between individuals across the globe. Because they operate on distributed ledger technology, DAOs are typically global in nature and can interact with members and stakeholders from different jurisdictions.

While there does not appear to be an agreed or accepted definition of what constitutes a DAO, the Law Commission of England and Wales in its 2022 Consultation Paper have defined DAOs as "a novel type of technology mediated social structure or organisation of participants involving the use of open-source software-based systems." This definition was significantly influenced by the decision in the high-profile case of Ooki DAO. In this case the Commodity Futures Trading Commission (CFTC) successfully obtained a default judgement against Ooki DAO for breaching the Commodity Exchange Act 1936 by operating a DAO which functioned in a manner similar to a trading platform without being registered as a futures commissions merchant.

It was decided that the Ooki DAO in question was an unincorporated association under California law and was a legal person thus permitting them to be sued. Worse still, as the DAO was not organised using an existing type of limited liability corporate vehicle, liability of those identified was unlimited.

Regulations of DAOs in Bermuda

In Bermuda, the Digital Asset Business Act 2018 ("DABA" or "Act") provides the legal framework for regulating digital asset businesses in Bermuda with oversight and guidance provided by the Bermuda Monetary Authority ("BMA"). While the Act itself does not specifically mention DAOs, it covers a broad range of activities related to digital assets such as token issuance, payment services, and custodial wallet services, which are activities conducted by many DAOs. It is important to note in respect of DABA, that it identifies specific activities that if conducted in or from within Bermuda, require the person conducting such activities to obtain a licence from the BMA. Therefore, developers looking to launch or operate a DAO in or from within Bermuda should consider whether the proposed activities of the DAO fall under DABA and, if so, consider how best to establish the organisation in Bermuda to ensure both compliance with the Act and limited liability of participants.

Some of the issues to date have been that DAOs have been created to provide an alternative to traditional corporate structures, doing away with fiduciary obligations and centralised oversight, but with that has come potential unlimited liability for those involved. Also, where jurisdictions have introduced legal structures to allow for legal recognition of a DAO, many have contradicted or been unable to sufficiently provide for the way in which DAOs are designed to be governed and used. Either way, whether a DAO uses a traditional, novel, or no formal legal structure in which to exist, it will not prevent the law from determining how the 'persons' involved in a DAO (whether founder, governance token holder or other participant) are to be treated from a legal perspective, which then identifies who is responsible, liable and subject to applicable regulatory oversight.

Fostering Bermuda's reputation as a hub for appropriately regulated innovative technology, in February 2025 the BMA issued a consultation paper: Call for Proposal – Embedded Supervision in the contact of Decentralised Finance. The consultation paper encourages stakeholders to help contribute to shaping the future of regulatory supervision of digital finance by joining an initiative to pilot test regulatory approaches for decentralised finance models, including DAOs. The latest initiative by the BMA further demonstrates the BMA's commitment to developing the regulatory framework for digital finance.

In summary, while DAOs themselves are not directly regulated as a distinct entity under Bermuda law, the activities they engage in, especially those involving digital assets, may fall under the jurisdiction of existing regulations like DABA.  Accordingly, anyone seeking to launch a DAO in or from within Bermuda should take appropriate legal advice on how to do so without breaching DABA or creating unintended and unlimited liability for those involved.

Carey Olsen Bermuda Limited is a limited liability company incorporated in Bermuda and approved and recognised under the Bermuda Bar (Professional Companies) Rules 2009. The use of the title "Partner" is merely to denote seniority. Services are provided on the basis of our current terms of business. 

An original version of this article was first published by INSOL International, February 2025.

British Virgin Islands (BVI)

Chapter authored by Carey Olsen Singapore partner James Noble, counsel Amelia Tan and senior associate Yan Chng. 

Overview

In the BVI, the interplay between arbitration clauses and winding up proceedings has arisen in the context of insolvency petitions, as well as in “just and equitable” (i.e. solvent) winding up proceedings.

In relation to the former, the Privy Council’s decision in Sian Participation Corp (in liquidation) v Halimeda International Ltd [2024] UKPC 16 (Sian Participation) recently affirmed the BVI Court's approach in Jinpeng Group Limited v Peak Hotels and Resorts Limited BVIHCMAP2014/0025 (8 December 2015) (Jinpeng) in staying insolvency proceedings only when a debt is genuinely disputed on substantial grounds.

In the context of a just and equitable winding up petition, the approach taken in the BVI was set out by the Court of Appeal in Kenworth Industrial Limited v Xin Gang Power Investments Limited BVIHCOM2023/0006 (1 February 2024) (Kenworth), discussed further below.

The starting point of the analysis is section 18 of the Arbitration Act 2013 and section 162 of the Insolvency Act 2003. Under section 18, where "an action is brought in a matter which is the subject of an arbitration agreement", the mandatory stay provisions apply such that the court "shall" refer the parties to arbitration, unless it finds that the arbitration agreement is "null and void, inoperative or incapable of being performed".

Insolvent winding up applications

It has been recently established that a creditors’ winding up petition on the insolvency ground under section 162(1)(a) of the Insolvency Act 2003 (i.e. on the ground that the debtor is unable to pay its debts as they fall due) is not an "action" within the meaning of section 18 of the Arbitration Act 2013, such that the mandatory stay provisions do not apply to creditors' liquidation applications.

The test in the BVI is whether the debt is disputed on genuine and substantial grounds. If so, and the dispute falls within the terms of the arbitration clause, then while there will not be a mandatory stay, the court retains a wide discretion under section 162 of the Insolvency Act 2003 to stay or dismiss the winding up application and force the parties to resolve the dispute by arbitration. This test was applied by the Court of Appeal of the Eastern Caribbean Supreme Court in Jinpeng. The Court had declined to follow the approach in the England and Wales decision in Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575 (Salford Estates), which required that a winding up application based on a debt that is covered by an arbitration agreement should be stayed unless there are exceptional circumstances.

In England and Wales, the decision in Salford Estates has now been overturned by the recent Privy Council decision in Sian Participation, where the Privy Council held that the BVI courts were correct not to follow Salford Estates, and Jinpeng had applied the correct test.

The correct test in England and Wales is now whether the debt is disputed on genuine and substantial grounds. This brings the approach in England and Wales in line with the BVI.

Just and equitable winding up applications

The position in the BVI in respect of just and equitable winding up applications under section 162(1) (b) of the Insolvency Act 2003 is that there will be a mandatory stay of the court proceedings under section 18 of the Arbitration Act 2013 to the extent the proceedings concern any matter that falls within the scope of an arbitration agreement.

This approach was adopted in Kenworth, which was decided after the Eastern Caribbean Supreme Court of Appeal's decision in Siong Beng Seng v Caldicott Worldwide Ltd BVIHCMAP2021/0007 (22 March 2023) (Caldicott) and shortly after the Privy Council handed down its judgment in FamilyMart China Holding Co Ltd v Ting Chuan (Cayman Islands) Holding Corporation [2023] UKPC 33 (FamilyMart).

In Kenworth, the BVI court applied the two-stage approach in Caldicott and FamilyMart for determining whether just and equitable winding up proceedings are caught within the scope of the arbitration agreement and ought to be stayed under section 18(1) of the Arbitration Act 2013: (i) to determine what the matters are which the parties have raised or foreseeably will raise in the court proceedings; and (ii) in relation to each such matter, whether it falls within the ambit of the arbitration agreement.

After determining that a mandatory stay applied to the winding up application, the court also held that there should, in any event, be a discretionary stay of the winding up application either at an interim stage or by deferring any final remedy pending the outcome of the arbitration, even if section 18 was not applicable. This would give effect to the role of arbitration policy and curial efficiency.

The Kenworth case confirms that the BVI courts will follow the Privy Council's decision in FamilyMart in determining whether just and equitable winding up applications ought to be stayed in favour of arbitration. The Court held that there is a public interest in holding that the decision in FamilyMart applies in the BVI as well as in the Cayman Islands, which is elaborated on in the section below.

Cayman Islands

Chapter authored by Carey Olsen partner James Noble, counsel Amelia Tan and senior associate Yan Chng. 

The law as set out in the FamilyMart decision

The Privy Council's decision in FamilyMart is a significant one in relation to the interplay between arbitration agreements and court applications for winding up on the just and equitable ground. While it had previously been well-established that the court has the exclusive jurisdiction to make a winding up order, it was unclear what the test was for deciding whether the underlying dispute in a just and equitable winding up application should be stayed pending arbitration. FamilyMart clarified that the applicable test is a two-stage analysis:

• first, the court must identify the matters which the parties have raised or foreseeably will raise in the court proceedings; and
• second, in relation to each such matter, whether it falls within the scope of the arbitration agreement.

In the Cayman Islands, the court has the power to wind up a company under section 92(e) of the Companies Act (2022 Revision) if the court is of the opinion that it is just and equitable to do so.

The Cayman Islands has separate legislation governing foreign and domestic arbitrations. The Foreign Arbitral Awards Enforcement Act (1997 Revision) (FAAEA) addresses the former, while the latter are governed by the Arbitration Act 2012.

FamilyMart concerned an application by the majority shareholder to strike out, dismiss or stay a just and equitable winding up application brought by the minority shareholder under section 4 of the FAAEA or, pursuant to the court's inherent jurisdiction, until the underlying dispute had been arbitrated.

In elaborating on the two-stage approach above, the Privy Council held that a "matter" is a substantial issue which is legally relevant to a claim or defence (or foreseeable defence) in the legal proceedings, and is susceptible to be determined by an arbitrator as a discrete dispute. The Board affirmed that the test is one of whether "substantial matters" fall within the ambit of the arbitration agreement. If so, a mandatory stay would be granted to the extent of those matters.

The two-stage approach similarly applies to non-insolvency proceedings

The two-stage method adopted in FamilyMart for determining whether matters must be referred to arbitration pursuant to section 4 of the FAAEA similarly applies to non-insolvency proceedings. In the matter of Ren Ci Cause No. FSD 210 of 2022 (DDJ) (16 February 2023) (Ren Ci), the Cayman Grand Court stayed proceedings which included claims for declarations, permanent injunctions and an order for rectification of the defendant's registers of directors and members, in favour of arbitration.

In doing so, the Court considered the two-stage inquiry in the English Court of Appeal judgment in The Republic of Mozambique v Credit Suisse International [2021] EWCA Civ 329. First, to identify the "matters" in respect of which the proceedings are brought. Second, to assess whether those matters are "matters" which the parties have agreed are "to be referred to arbitration".

The Court in Ren Ci held that it should stay the proceedings to the extent of any issues which fall within the ambit of an arbitration agreement. The search is not for the main issue or issues, or what are the most substantial issues, but for any and all issues which may be the subject matter of an arbitration agreement.

Insolvent winding up petitions

The position in the Cayman Islands towards insolvent winding up proceedings, where there is an arbitration agreement in existence, has not been settled. The Grand Court has adopted differing approaches across cases, and the appellate court has not had an occasion to consider the issue.

In the recent Grand Court decision in Re BPGIC Holdings Limited (unrep., 20 November 2023, FSD 248 of 2023 (MRHCJ)) (BPGIC Holdings), Ramsay-Hale CJ held that the Cayman courts should not shy away from examining the evidence to determine the threshold question of whether the dispute is genuine and substantial. The Court declined to follow an earlier Grand Court decision in Re Times Property Holdings Ltd [2011(1) CILR 223] insofar as it is said to be authority for the proposition that once the debt is disputed the Court should not determine the threshold question as to the genuineness of the dispute.

The Court also departed from the English position in the now-overruled Salford Estates, which imposed the "wholly exceptional circumstances" test. Ramsay-Hale CJ held that, unlike the United Kingdom provisions, section 4 of the FAAEA directs the Cayman court to determine the threshold question of whether the debt is bona fide disputed on substantial grounds before dismissing a petition in favour of arbitration. The court's normal practice is to stay the petition if it finds that there is a genuine dispute of substance with respect to the debt, leaving the dispute to be resolved in a different action or in a different forum. This approach is consistent with what was adopted in the earlier Grand Court decisions of Re Grand State Investments Limited (unreported, 28 April 2021, FSD 11 of 2021 (RPJ)) and Re Duet Real Estate Partners 1 LP (unreported, 7 June 2011, FSD 77 of 2011 (AJJ)), where the Court undertook an inquiry of whether there was a genuine and substantial dispute as to the existence of the alleged debt.

The prevailing methodology in insolvent winding up applications in the Cayman Islands is that the court will at least determine the threshold question of whether there is a genuine and substantial dispute of the alleged debt. However, BGPIC Holdings was decided before Sian Participation. It is therefore likely that the Cayman court will now derive guidance from the decision in Sian Participation (which BGPIC Holdings is consistent with in any event) in future cases.

Bermuda

Chapter authored by Carey Olsen Hong Kong partner Matthew Watson. 

There are two different arbitration regimes in Bermuda. The Arbitration Act 1986 governs the arbitration of domestic disputes, while the Bermuda International Conciliation and Arbitration Act 1993 (1993 Act), which incorporates into Bermuda law the UNCITRAL Model Law on International Commercial Arbitration, applies to "international commercial arbitrations”. 

This section of the technical paper focuses on international arbitration under the 1993 Act. The 1993 Act does not contain a similar provision to section 9 of the Arbitration Act 1996 of England and Wales.

The Companies Act 1981, the Companies (Winding Up) Rules 1982 and the Bankruptcy Act 1989 (as applied to corporate insolvency by sections 234 and 235 of the Companies Act 1981) are the primary statutes regulating insolvencies of corporate entities in Bermuda. The insolvency regimes provided by the Companies Act 1981 and the Companies (Winding Up Rules) 1982 are derived largely from the English Companies Act 1948 and corresponding rules.

Upon hearing a winding up petition, the court has the power to dismiss or adjourn the petition on such terms as it thinks fit (section 164 of the Companies Act 1981). It also has the power to stay a winding up petition upon the application of the company, creditor or contributory (section 165 of the Companies Act 1981).

Privy Council decisions on general common law issues unaffected by local statutes are binding on the Bermudian courts, even if the appeal to the Privy Council emanated from another jurisdiction such as the BVI or the Cayman Islands.

The recent Privy Council decisions in Sian Participation and FamilyMart are expected to be binding in Bermuda, such that it is anticipated that the Bermuda courts will apply a test – in exercising their discretion whether to make a liquidation order in circumstances where there is an arbitration agreement between the parties – of whether the debt is disputed on genuine and substantial grounds. It is apparent that the Privy Council's conclusion not only applies to generally worded arbitration agreements, but also to exclusive jurisdiction clauses.

Jersey

Chapter authored by Carey Olsen Jersey partner Marcus Pallot and senior associate Mike Kushner.

Overview

Under the laws of Jersey, a creditor whose claim is subject to a genuine dispute cannot apply for the debtor's bankruptcy. This is so regardless of whether the claim is subject to an arbitration agreement or not. It is principally a matter for the court to determine whether a genuine dispute exists. In the bankruptcy context, the court has the discretion (but not the obligation) to direct that a matter which is subject to an arbitration agreement be determined by way of arbitration.

A creditor is also precluded from seeking the debtor's bankruptcy where there is a non-petition agreement in place. Therefore, an arbitration agreement which contains an explicit undertaking not to commence bankruptcy proceedings would be enforceable in accordance with its terms. The court would have no discretion to entertain an application for bankruptcy in circumstances where the creditor is party to a non-petition agreement.

Jersey insolvency mechanisms

There are a number of different insolvency mechanisms in Jersey. The two key creditor-driven mechanisms are:

• an application for a creditors’ winding up (Companies (Jersey) Law, Article 157A); and
• an application for a declaration of désastre (pursuant to the Bankruptcy (Désastre) (Jersey) Law 1990).

Both of these creditor-driven mechanisms require the creditor to have a claim against the debtor in a "liquidated sum" of not less than the prescribed amount (currently £3,000).

Creditor must have a claim in a "liquidated sum" – i.e. not subject to a genuine dispute

The creditor's claim must be certain and not the subject of a genuine dispute, arguable defence or counterclaim. Putting it another way, it is open to a debtor to resist bankruptcy on the basis that the creditor's claim is the subject of a genuine dispute.

It is principally for the court, seized of a bankruptcy application, to determine whether a genuine dispute exists. As we will explain below, the existence of an arbitration clause does not oust the court's jurisdiction to rule on this. Ultimately, the court must be satisfied on a balance of probabilities that the creditor's claim is such as may form the basis of a summary judgment. Applying the Jersey summary judgment test, this means that the defence must have a real prospect of success – that is, the defence must be realistic as opposed to fanciful, and better than merely arguable.

An arbitration clause does not oust the court's jurisdiction to determine whether a debt is disputed on genuine grounds

Assuming that the creditor's claim is subject to an arbitration clause, the court could refer the matter to arbitration. In our view, the court would be entitled – but not obliged – to refer to arbitration the question of whether there is a genuine dispute.

This position is supported by article 4 of the Arbitration (Jersey) Law 1998, which deals explicitly with the interplay between bankruptcy and arbitration. In particular, article 4(2) of the Arbitration (Jersey) Law 1998 provides that if an arbitration agreement applies to a matter to be determined in connection with or for the purposes of bankruptcy proceedings, the court may direct that the matter be determined by way of arbitration. Accordingly, the court could direct that the issue of whether a genuine dispute arises or not be referred to arbitration.

Insofar as the court will be conscious of the overriding objective to resolve disputes justly and at proportionate cost, it seems far more likely that the court would grasp the nettle and decide for itself whether there is a genuine dispute rather than referring that narrow point to arbitration. Of course, where the court is satisfied that there is indeed a genuine dispute, the creditor would not succeed with its bankruptcy application. The creditor would have to pursue its claim by way of arbitration. This is so because, outside of the bankruptcy context in which the special rules described above apply, article 5 of the Arbitration (Jersey) Law 1998 provides for a mandatory stay of court proceedings where a dispute is subject to an arbitration agreement.

Non-petition provisions

A further scenario that may arise is where there is a dispute resolution clause, which contains an arbitration clause coupled with a non-petition provision. That is, a provision by which the creditor undertakes not to commence bankruptcy proceedings against the debtor.

In such a case, if the creditor sought to commence bankruptcy proceedings, the court would be obliged to refuse to grant the creditor's application. This situation is regulated by article 3 of the Bankruptcy (Netting, Contractual Subordination and Non-Petition Provisions) (Jersey) Law 2005, which provides that notwithstanding any provision of law to the contrary, a non-petition provision of an agreement is enforceable in accordance with its terms by any party to the agreement. Accordingly, where a creditor has undertaken not to commence bankruptcy proceedings, the court is obliged – "shall" being the word used in the statute – to refuse the creditor's application.

Guernsey

Chapter authored by Carey Olsen Guernsey partner David Jones.

The relationship between arbitration and insolvency proceedings in Guernsey is relatively untested. While arbitration in an insolvency context is not prohibited, there are very few practical examples of arbitration being used in Guernsey for insolvency or restructuring matters.

The statutory framework for arbitration is contained in the Arbitration (Guernsey) Law 2016 (Guernsey Law). The Guernsey Law is an expansion and reformulation of the previous arbitration regime contained within the Arbitration (Guernsey) Law 1982 (1982 Law), and it offers greater powers, flexibility and scope for judicial intervention in the arbitral space.

The Guernsey Law utilises English jurisprudence and internationally recognised standards, modelling itself primarily on two foreign instruments:

• the UN Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (Model Law); and
• the United Kingdom statute, the Arbitration Act 1996 (applying to England, Wales and Northern Ireland).

Where parties have entered into an arbitration agreement, or a commercial contract contains an arbitration clause, then pursuant to section 6 of the Guernsey Law, a party to that agreement can apply to the court in which the proceedings have been brought for a stay of proceedings. The court in the jurisdiction where the application has been brought must grant the stay unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable or being performed. This is equally applicable in an insolvency context as it would be generally.

The lack of specific case law in this area in Guernsey makes drawing conclusions as to the court's approach to the interplay between arbitration clauses and insolvency uncertain. However, Guernsey does have a robust and internationally recognised statutory arbitration regime. The jurisdiction has a solid legal framework in place to facilitate any increase in parties opting for arbitration over traditional court processes in insolvency matters.

Where Guernsey also has an established track record is in the recognition and enforcement of final foreign arbitration awards pursuant to section 84 of the Guernsey Law and the Parts II and III of the 1982 Law. A distinct procedure exists under the Guernsey Law for recognition of New York Convention awards made in a State, other than the United Kingdom, that is a contracting party to the New York Convention 1958.

The close alignment with the United Kingdom means that Guernsey will always have a bank of persuasive authorities to draw upon even where the jurisdiction does not handle a significant volume of arbitrations.

Although as yet untested, it is anticipated that the Guernsey court would adopt a similar approach as outlined by the Privy Council in Sian Participation, finding that liquidation applications are not subject to the stay provisions outlined in section 6 of the Guernsey Law, as such proceedings are not directly related to the claim for monies owed. Liquidations, whereby the Royal Court exercises its supervisory jurisdiction, would fall outside the confines of any arbitration agreement between the parties. Finally, the judgment in Sian Participation outlined that the policies underlying the arbitration legislation which implement the Model Law are not offended or infringed by a party to an arbitration agreement who seeks the liquidation of a debtor party which fails to pay a debt. While this was in the context of the BVI legislation, because the Guernsey Law is modelled on the Model Law, the ratio of the Board in Sian Particiaption would be difficult for the Guernsey courts to depart from.

Singapore

Chapter authored by Herbert Smith Freehills Prolegis.

Overview

Singapore presently follows the traditional approach in Salford Estates. The threshold test is whether, on a prima facie basis, there is a valid arbitration agreement between the parties, and the dispute falls within the scope of that agreement, as opposed to whether there are genuine and substantial grounds for disputing the debt (i.e. the formulation of the test in Sian Participation).

Hence, under prevailing Singapore law, where a dispute is governed by an arbitration agreement, and the defendant disputes the debt or raises a cross-claim arising out of such a contract, the insolvency court will consider whether:

• the arbitration agreement appears prima facie to be valid;
• the dispute or cross-claim appears prima facie to fall within the scope of the arbitration agreement; and
• the defendant is abusing the court's process by raising the dispute or cross-claim.

These are known as the "AnAn requirements", from the decision in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co).

If the AnAn requirements are satisfied, then the insolvency court will ordinarily dismiss the winding up application, or, in exceptional circumstances, grant a stay of the winding up proceedings. This is consistent with the principle of party autonomy – i.e. where the parties had agreed to a method of dispute resolution, it should be upheld, and the insolvency court should not allow a creditor to bypass the arbitration agreement by presenting a winding up application in an attempt to get the court to resolve their disputes.

The AnAn requirements have recently been endorsed by Singapore's highest court in a case decided in November 2023. Per the Founder Group decision, the steps to be taken by the Singapore insolvency court in winding up applications where a debtor's liability is disputed or contested may be summarised as follows:

• where there is no arbitration agreement, and where the facts and the liability are heavily contested, and cannot be summarily disposed of, the insolvency court should dismiss, or exceptionally, stay, the winding up application;
• where there is no arbitration agreement, and where the insolvency court is satisfied that no triable issues have been raised, then the winding up application may be granted; and
• where the dispute in question is governed by an arbitration agreement, the defendant may apply for the court proceedings to be stayed to compel the dispute to be referred to arbitration.

A stay will typically be granted if the court is satisfied on a prima facie basis that there is a valid arbitration agreement between the parties, and the dispute falls within the scope of that agreement.

The AnAn requirements are relevant to a creditor's standing to present a winding up petition

The AnAn requirements do not apply solely to whether a winding up application may be granted. The requirements also directly impact whether a creditor has standing to present the application in the first place.

In Founder Group, the Singapore Court of Appeal expressly clarified that a claimant who relies on a disputed debt that is subject to arbitration cannot claim to have status as a creditor. It is only when the debt has been established by way of arbitration, and remains unsatisfied, that the insolvency regime is engaged.

Hence, where a debt is subject to a dispute that falls within the scope of an applicable arbitration clause, the claimant cannot be considered to be a creditor of the defendant until that dispute has been resolved by arbitration in the claimant's favour. Until then, the claimant will have no standing to even present a winding up application as a creditor in the first place.

The AnAn requirements will not be applied in a vacuum

However, as shown in the Founder Group decision, the existence of an arbitration clause does not guarantee that pending winding up proceedings will be dismissed or stayed. In a very narrow set of facts in Founder Group, the respondent had sought to rely on the arbitration clauses while simultaneously maintaining that the contracts (that contained the arbitration clauses) were null and void.

This is not permissible under Singapore law, and accordingly, Singapore's Court of Appeal was satisfied that the respondent could not invoke the arbitration agreement in these circumstances and the AnAn requirements therefore did not apply at all. It would be an abuse of process for the debtor to adopt an inconsistent position in the same or related proceedings in the absence of a clear and / or convincing reason to do so.

The Singapore insolvency court therefore retains a high level of discretion to undertake a fact-sensitive exercise where the very applicability of the arbitration clause is in issue.

The AnAn requirements will apply in applications for Fortuna injunctions

A Fortuna injunction – derived from the Australian case of Fortuna Holdings Pty Ltd v Deputy Federal Commissioner of Taxation – is an order from the insolvency court prohibiting or restraining a creditor from filing and presenting a winding-up petition against the alleged debtor.

Where a dispute is raised by a debtor in these circumstances, and the debt is prima facie subject to an applicable arbitration agreement, the Singapore insolvency court will be in favour of granting an injunction restraining the commencement of winding-up proceedings. Such an injunction may be subject to conditions, for example, that it last only until the end of pending arbitration proceedings.

The impact of Sian Participation in Singapore

In Sian Participation, the Privy Council considered what test a court should apply in exercising its discretion whether to make a liquidation order under BVI law (similar to an order for winding up in Singapore) where the debt concerned is subject to an arbitration agreement.

The Sian Participation decision has not yet been applied in Singapore. As of the date of writing, no test case has arisen for the Singapore Court's contemplation. Moreover, Founder Group is a very recent decision of Singapore's apex court which affirms the continued application of the AnAn requirements. Accordingly, it is not clear whether the Singapore courts will so easily adopt the reasoning in Sian Participation, although the Privy Council's reasoning may undeniably be persuasive in any future reconsideration by the Singapore courts of the AnAn requirements.

It should further be noted that, in December 2024, the Singapore International Arbitration Centre (SIAC) released for public consultation a draft of the new SIAC Insolvency Arbitration Protocol.

The Draft Protocol contemplates, among other things, that parties can opt in to an expedited and time-efficient six month arbitration procedure for the resolution of disputes relating to insolvency proceedings. The SIAC appears to be the first international arbitration institution to propose the use of an arbitration protocol for the resolution of insolvency-related disputes and claims.

The Protocol is still in draft form and is not final at this stage. Depending on its implementation, the SIAC may, in time, prove to be a suitable and cost-efficient forum for the adjudication and resolution of insolvency-proceeding related disputes governed by arbitration clauses.

England and Wales

Chapter authored by Herbert Smith Freehills.

Overview

Under the law of England and Wales, where a winding-up petition is made based on a debt subject to an arbitration agreement, the courts will only stay or dismiss the petition in favour of arbitration if the debt is genuinely disputed on substantial grounds.

This current position was established by the recent decision of the Privy Council in Sian Participation. This now represents the law of England and Wales and overturns the earlier decision of the Court of Appeal in Salford Estates, the Privy Council having expressly determined so by making a so-called Willers v Joyce order in the course of its decision in Sian Participation.

This change provides for harmonisation of the position under English law as regards both jurisdiction and arbitration clauses and with the laws of other common law jurisdictions, including the BVI.

The applicable statutory regime in England and Wales

At the highest level, the interplay between arbitration and insolvency under the law of England and Wales is reflected in the Insolvency Act 1986 and the Arbitration Act 1996.

While the court has the discretion to wind up a company under section 122(1) of the Insolvency Act 1986 on the grounds of commercial insolvency (i.e. the company cannot pay its debts as they fall due), parties are also free to agree that their disputes should be resolved by arbitration under the Arbitration Act 1996 – including disputes as to debts upon which a winding up petition may be based.

The latter public policy is underwritten by section 9 of the Arbitration Act 1996, under which a party to an arbitration agreement against whom legal proceedings are brought may apply to the court for a mandatory stay of those legal proceedings in respect of matters subject to that agreement.

Friction between the insolvency and arbitration regimes

No conflict arises between the insolvency and arbitration regimes where a debt is undisputed because there is no dispute that needs to be resolved by arbitration. Similarly, no conflict should arise in respect of disputed debts, because a disputed debt is not good evidence of insolvency for the purposes of a winding up petition until the dispute is resolved and liability is established.

The key question is therefore when a debt can be said to be disputed and where the line should be drawn between the insolvency and dispute resolution processes.

In circumstances where there is no arbitration agreement (e.g. where the parties include an exclusive jurisdiction clause in favour of foreign or domestic courts), the question depends on whether the debt is genuinely disputed by the debtor on substantial grounds. If this threshold is met, the winding up petition will generally be dismissed. Conversely, if it is not met, the insolvency regime takes precedence and a winding up petition is highly unlikely to be stayed or dismissed by the court.

Traditionally, however, the position was different where disputes were subject to an arbitration agreement.

The previous position: a winding-up petition would be stayed where the debt is not admitted

Under the now-overturned case of Salford Estates, where a debt was subject to an arbitration agreement, the English courts would routinely exercise a discretionary stay or dismissal of a winding up petition if the debt concerned was simply denied or not admitted. Non-admission by the debtor was sufficient to constitute a dispute that should be referred to and resolved by arbitration, regardless of the substantive merits of any defence. This low threshold was thought to be consistent with the legislative policy of the Arbitration Act 1996 of holding parties to their agreement to arbitrate.

The decision in Salford Estates was based on the court's inherent discretion under section 122(1) of the Insolvency Act 1986, rather than on a mandatory stay under section 9 of the Arbitration Act 1996.

Salford Estates in fact acknowledged that winding up petitions do not fall within the scope of section 9 of the Arbitration Act 1996 at all. They are not legal proceedings by a creditor against a debtor and do not determine questions of liability or quantum as to the debt between them. Rather, winding up petitions are instead intended to prove the debtor's insolvency (of which the debt is evidence) and initiate a broader insolvency process to divide the debtor's assets fairly between all creditors.

Although based on the court's discretionary powers under section 122(1), the court's decision in Salford Estates was tantamount to requiring a mandatory stay of any winding up petition where the debt concerned was subject to an arbitration agreement and merely not admitted by the debtor.

Sian Participation: a winding up petition will be stayed only if the debt is disputed on genuine and substantial grounds

In Sian Participation, the Privy Council revisited this issue and considered what test a court should apply in exercising its discretion whether to make a liquidation order under BVI law (equivalent to an order for winding up in England), where the debt concerned is subject to an arbitration agreement.

As noted earlier in this paper, the Privy Council held that Salford Estates was wrongly decided and that the correct test is whether the debt is genuinely disputed on substantial grounds. To this end, the Privy Council made a Willers v Joyce order that Sian Participation, insofar as it holds that Salford was wrongly decided, now represents the law in England and Wales.

The court held that there was no principled reason why a lower threshold should apply to determine whether debts subject to arbitration are disputed as against the standard that English law applies to disputed debts in other contexts. The Privy Council emphasised that section 9 of the Arbitration Act 1996 does not apply to winding up petitions and so the parties could have no expectation of a mandatory stay being issued simply because the parties have agreed to arbitrate. A winding up petition per se therefore does not infringe on party autonomy or the contractual obligation to refer disputes to arbitration. Neither does it contravene any policy underlying the Arbitration Act 1996, the boundary of which is drawn by the mandatory stay provision in section 9. It was held that the court in Salford had erred in assuming that the policy underlying the Arbitration Act 1996 was more expansive than the terms of section 9.

One potential area of uncertainty is that the Privy Council stressed that its decision applied in circumstances where there is a "generally worded arbitration agreement" and left open the possibility of a different outcome if an arbitration agreement is framed in terms that apply specifically to a creditor's winding up petition. It is not entirely clear how this would apply in practice, but does appear to leave open the possibility of parties expressly agreeing to alter the threshold for disputed matters in arbitration agreements.

Genuine and substantial grounds likely to require a rational prospect of success

A stay will therefore now be granted on a winding up petition based on a debt subject to an arbitration agreement only if the debt is genuinely disputed on substantial grounds. This likely requires a rational prospect of success and not merely a "cloud of objections".

Hong Kong

Chapter authored by Herbert Smith Freehills.

Overview

The latest Hong Kong position was established in 2023 in the Hong Kong Court of Final Appeal (HKCFA) decision in Guy Kwok-Hung Lam v Tor Asia Credit Master Fund LP21 (Guy Lam), as subsequently clarified by a pair of decisions from the Hong Kong Court of Appeal (HKCA) in April 2024.

Pursuant to the Hong Kong approach, if the contract under which the debt allegedly arises is subject to an arbitration or exclusive jurisdiction clause (EJC), the court has a discretion to determine whether to exercise or decline its jurisdiction over the disputed debt based on a "multi-factorial approach". Absent any "countervailing factors", such as where the dispute borders on the frivolous or an abuse of process, the parties' agreement will generally be respected and upheld by the Hong Kong courts.

The previous position: conflicting authorities on whether an arbitration agreement would be upheld in winding up proceedings

The debate first arose in Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd (Lasmos) in 2018. In that case, the Hong Kong Court of First Instance (HKCFI) held that where a debtor company disputes the underlying debt and takes steps to commence arbitration in accordance with the contractually mandated dispute resolution process, the court should generally pay deference to arbitration and not grant any winding up orders. Under the Lasmos approach, the court retains a discretion to make a winding up order in very exceptional circumstances, such as where there is a risk of misappropriation of assets. This case marked a clear departure from the historically established approach that the debtor would be required to demonstrate a bona fide dispute of the petition debt on substantial grounds.

The Lasmos approach was, however, controversial and was not universally followed in later HKCFI decisions.

Subsequently, in May 2023, in an analogous context involving a foreign EJC and a bankruptcy petition, the HKCFA held in Guy Lam that where the underlying debt is subject to a foreign EJC, absent countervailing factors such as the risk of insolvency affecting third parties, a dispute that borders on the frivolous, or abuse of process, the effect of the EJC should be upheld. Nonetheless, the HKCFA left open the question of whether these principles apply equally where the debt is subject to an arbitration agreement.

Different HKCFI judges have since expressed different views on how to deal with arbitration clauses in the context of a winding up petition, leading to conflicting authorities on this important question.

The current position: the test to winding up seems higher and is based on a multi-factorial approach

Following the twin decisions of Re Simplicity & Vogue Retailing (HK) Co Limited (Re Simplicity, in which our firm acted for the successful petitioner),24 and Re Shandong Chenming Paper Holdings Limited (Re Shandong Chenming), which both came out in April 2024, the HKCA has now clarified that the approach in Guy Lam applies equally where a debtor opposes a winding up petition on the basis of a defence or claim being subject to an arbitration agreement.

As a starting point, the parties' arbitration agreement should be respected and upheld. In other words, the court in exercising its discretion should decline jurisdiction on the petition debt (including the jurisdiction to determine whether there is a bona fide dispute of the debt on substantial grounds).

However, this is subject to a residual discretion of the court to assume jurisdiction and determine the relevant defence or claim where it considers there to be "strong reasons" or "countervailing factors" at play. Prime examples of such countervailing factors are where the debtor's defence or claim is frivolous or an abuse of process, or where there is a risk of the debtor’s insolvency affecting third parties. In considering the relevant "countervailing factors", the HKCA also made clear that the examples given by the court are non-exhaustive and will be assessed on a case-by-case basis.

In addition, the third requirement laid down in Lasmos continues to be relevant, such that debtors are also required to demonstrate a genuine intention to arbitrate, including taking steps to commence the contractually mandated dispute resolution process under the arbitration clause, rather than just raising an arbitration clause as a tactical move.

The recent development in Sian Participation

The position in England and Wales and in the BVI has since diverged from the Hong Kong position.

As noted already in this paper, the Privy Council held in Sian Participation that the court will stay or dismiss a winding up petition in favour of arbitration only if the debt is genuinely disputed on substantial grounds (in contrast to the starting point in Hong Kong that the parties’ arbitration agreement should ordinarily be respected and upheld). However, as a matter of stare decisis, Sian Participation is not binding on the Hong Kong courts.

This has been confirmed by the HKCFI in Re Mega Gold Holdings Ltd, where the court observed that there is a stark difference between the approach taken by the Privy Council and that adopted by the Hong Kong courts. It remains to be seen whether the HKCFA will adopt the test in this Privy Council decision if and when a further opportunity arises for it to reconsider the matter.

The path forward in Hong Kong

Given the current approach's strong focus on taking all circumstances into account, and the fact that it is relatively new, there remains some uncertainty on what kind of "countervailing factors" would be sufficient to tip the balance and lead to a successful winding up petition in Hong Kong despite an arbitration clause or an EJC.

It will also be interesting to see what the Hong Kong courts will find to be a defence or claim "which borders on the frivolous or an abuse of process" – and how that may be different in practice from the lack of bona fide substantial grounds.

Thailand

Overview

Chapter authored by Herbert Smith Freehills.

The legal system of Thailand is fundamentally a civil law system. The criteria for consideration primarily rely on statutory law, with the Supreme Court's judgments serving as a precedent to interpret laws in lower and subsequent court cases.

Petition for bankruptcy against a debtor under Thai law

The interplay between arbitration and bankruptcy under Thai law is governed by the Arbitration Act B.E. 2545 (2002) (Arbitration Act) and the Bankruptcy Act B.E. 2483 (1940) (Bankruptcy Act) of Thailand. In particular, Thai law has established criteria for creditors to file an application for bankruptcy against debtors in section 9 of Bankruptcy Act, only if:

• the debtor becomes insolvent;
• the debtor who is a natural person is indebted to one or more plaintiff creditors in an amount of not less than one million Baht or the debtor who is a juristic person is indebted to one or more plaintiff creditors in an amount of not less than two million Baht; and
• the definite amount of such debt is determinable, whether it becomes due forthwith or at a future date.

If the above criteria are satisfied by the court, the court shall issue "an absolute receivership order" against the debtor. Upon the court’s receivership order against the debtor, the Official Receiver is empowered to:

• manage and dispose of the debtor's property, collect and receive money or property which the debtor is entitled to receive form other persons, and conclude, compromise or institute any action or defend in an any action in connection with the debtor's property; and
• join all civil actions concerning the debtor’s property pending in court at the time of the receivership order and the court, upon the Official Receiver’s application by motion, has the power to order a stay of such civil action or order otherwise, as it deems appropriate.

In addition, upon the court’s receivership order against the debtor, a creditor in Thailand may request payment of a debt only by applying to the Official Receiver within two months as from the date of the publication of the absolute receivership order, although the creditor is a judgment creditor or a creditor who has instituted a civil action which remains under trial.

Validity of the arbitration agreement

The validity of the arbitration agreement is confirmed in section 12 of the Arbitration Act, which determines that "the validity of the arbitration agreement and the appointment of arbitrator shall not be prejudiced, even if any party thereto is dead, or ceases to be a juristic person, or against whom an absolute receivership order has been issued against his property, or has been adjudged incompetent or quasi-incompetent."

However, section 12 of the Arbitration Act is not an exception to the principle regarding debt recovery under bankruptcy law, but rather a provision concerning the validity of arbitration agreements and the establishment of arbitration, affirming that these agreements remain valid even if subsequently one party is subject to an absolute receivership order (as precedent in the Supreme Court Judgment Nos. 7082-7083/2558).

Interplay between bankruptcy and arbitration proceedings

To analyse this issue, it is worth considering the following two scenarios, where a creditor initiates arbitration proceedings against a debtor according to the arbitration agreement, before filing an applicant for a bankruptcy order against the debtor.

(1) The debt claimed in the bankruptcy case is the same amount as the dispute under arbitration

Presuming that the criteria under sections 9(1) and 9(2) of the Bankruptcy Act are satisfied, the court will not grant the petition of the creditor (the claimant in the arbitration) for a bankruptcy order because as long as the arbitral tribunal does not issue the final award, the disputed amount under the arbitration could not regarded as the determinable debt under section 9(3) of the Bankruptcy Act (as precedent in the Supreme Court Judgment Nos. 5525/2552 and 5618/2559).

(2) The debt claimed in the bankruptcy case is not the same amount as the dispute under arbitration, or other creditors (not the claimant in arbitration) apply for a bankruptcy order against the debtor (the respondent in arbitration).

The court could render an absolute receivership order, provided that the legal criteria under section 9 of the Bankruptcy Act are achieved. If the court issues the absolute receivership order against the debtor, the Official Receiver will be empowered to take control all the debtor's properties and join the pending arbitration. The Official Receiver may request the arbitral tribunal to suspend proceedings temporarily or proceed with the case on behalf of the debtor if it is deemed more beneficial for managing and collecting the debtor's assets (as precedent in the Supreme Court Judgment No. 278/2562).

Conclusion

It is evident that different jurisdictions have adopted very different approaches when considering the interplay between arbitration and insolvency, and this is an evolving area of the law. The guidance provided by the Privy Council in Sian Participation and FamilyMart has offered some clarity on the position in various jurisdictions and is a welcome development. It remains to be seen, however, whether other jurisdictions will adopt the same approach when future cases arise for consideration.

An original version of this article was first published by STEP Journal, February 2025. 

What is the issue?

Artificial intelligence (AI) is taking the world by storm with its fast integration into both personal and
work life.

What does it mean for me? 

Firms worldwide are intrigued about AI’s capabilities, but at this current time there is not a full
understanding of AI in general and, more specifically, the abilities of certain AI models.

What can I take away?

What should be considered is how generative, algorithmic and predictive AI can be used within a law
firm, and the considerations that should be made when using AI in a professional setting.

Although artificial intelligence (AI) began in the 1950s with Alan Turing publishing ‘Computer
Machinery and Intelligence’,[1] it has since become more commonly used, with its adoption
exponentially increasing over the past year or two. ‘Generative’ AI is commonly used to assist in
creating text, images, video and other types of documentation at a fast pace. By contrast, algorithmicor predictive AI can be used to determine outcomes on variables using statistics.

Generative AI

Generative AI models specifically have captured most of the attention and have seen the largest
growth in their use, especially with the likes of ChatGPT offering free versions online. However, the
constraints of free AI software must be considered. One such consideration should be when the
underlying data was last updated, to ensure that it is following the most recent precedents. For
example, in some areas of the law where precedents are quickly updated, it is crucial that the output
of data from AI software does not follow out of date practices. This could lead to claims of negligence
if the correct level of attention to the output of information is not considered by the professional who
takes advantage of it. Additionally, the use of free AI models in most cases demands the user to agree
to long sets of terms and conditions and, in some cases, these terms request that the AI model can
learn from the information given to it. They will often include provision for the AI model to reuse the
information provided to it in an open-source fashion, making it free for use in the public domain. This
means that data put into the AI system can be taken by the software developers and (if they wish) be
made public information. Although it may be free to use, the buyer must beware; this will not suit
private clients for whom the emphasis is definitely on ‘private’.

Since the exponential increase of generative AI use and acceptability in recent years, the fear of AI
replacing many occupations has been gradually increasing. For some private client advisors, the worry
is that generative AI will replace the need to go to a firm to request assistance. However, this is not
everyone’s prediction for how the industry’s relationship with AI will develop. At the time of writing, AI
has been seen as a useful way to increase productivity within firms due to the speed that it can
undertake certain tasks. By way of example, using AI as an assistive tool for tasks such as document
comparison can radically decrease the time the task would take if done manually.

Maintaining standards

The STEP Code of Professional Conduct requires members to perform competent work, requiring
necessary knowledge, skill, thoroughness and preparation, as well as performing the work diligently
and conscientiously. Whether clients and STEP members find that ‘outsourcing’ much of a private
client practice to AI meets these requirements remains to be seen. This is particularly so if the
extensive use of AI is not disclosed to or agreed by the clients in advance.

In the legal field, there are anecdotal examples of legal professionals using AI and it not working out
as envisaged. Sometimes, text generated by AI software can include information which may not be
correct, which has aptly been labelled as ‘AI hallucination’. The phrase can be criticised for its use in
the technological domain due to the fact this gives AI a sense of human-like qualities, and the phrase
‘AI fabrication’ is seen to be a more accurate representation of what AI is actually doing. The way that
generative AI can conflate information, or mislead by contradicting information, is prevalent,
especially as models can pick up contradicting data and information while mining for new data.

AI in court 

This was seen in the case of Mata v Aviancain the US,[2] where Mr Mata’s lawyers had used ChatGPT
to formulate their arguments. Unfortunately for Mata, the AI fabricated case law to suit the arguments
of his lawyers. Unfortunately for Mata’s lawyers, they did not check the results before presenting
them. This was a US case but the dangers of using AI as a practising lawyer override the issue of
jurisdiction. An over-reliance on AI (or any technology for that matter) and a failure to proof work will
always give rise to issues.

People's main concerns with AI are its accuracy, bias and potential to mine the data that it has been
given to make the data public. Large language models (LLM) are a type of AI that is used to analyse
and summarise content. Although it may seem like there is a flaw with AI models that use LLMs, it
could also be argued the issue is more with the information that it takes from varying online
resources. If there is data that presents as inherently biased, the LLM is likely to use that data and
learn its own biases. As of the time of writing, there are still issues with AI LLMs relating to data that
may have been stolen from private entities and potentially biased sources.

However, researchers from the University of Oxford have recently made significant developments in
ensuring that information generated by AI models is more reliable (the Study). The main method for
this was by using ‘semantic entropy’[3] to ensure that there is minimal uncertainty from AI models
when mining and generating data.[4] This add-on for AI models could decrease the likelihood of AI
hallucination and could also assist AI models with the accuracy of the generative responses outputted
by the software. The Study hopes to prove that AI models can become more accurate by using specific
formulae to comprise all similar information for the most accurate output. Although this may not
replace professionals in the near future, using AI models with semantic entropy could assist
practitioners and allow for higher productivity with less chance for error.

Algorithmic and predictive AI 

Two areas of AI that are worth consideration in the future world of AI-supported private client practice
are algorithmic and predictive AI. The use of algorithmic and predictive AI has been used in various
jurisdictions worldwide with different levels of integration. The aim for using AI as an assistive tool is to
remove any personal biases by adding an extra layer of consistency with technology, but it is of
course early days and more time is needed to ascertain whether they are on the right path.

There are concerns that, due to the rise in AI in recent years, there are not enough protections in
place for people. Although in most jurisdictions there is not any AI-specific legislation, individual rights
can be protected and AI can be governed through legislative measures that are already in force, such
as the General Data Protection Regulation and the UK Human Rights Act 1998.

The Regulation (EU) 2024/1689 (the Regulation) was adopted by the European Council in May 2024,
with intentions for all provisions to be in force from August 2026. As the first AI-specific regulation, it
provides a foundation for the understanding of AI in the law. Until it is in force, the regulation of AI in
the EU does not have a specific legal standing, nor are legal definitions of specific terminology
regarding AI in one place. Although the Regulation will only be enforceable in countries that are part of
the EU, there have been developments in jurisdictions worldwide, based on both the Regulation and
the work of other legislatures.

In the UK, the Office for Artificial Intelligence has become a part of the Department for Science,
Innovation and Technology, as of February 2024. This Office has provided some guidance and
regulatory measures for use within the UK. Although this office is relatively new to the UK government,
discussions of AI have been published on the government website since 2019.

The hope for the future is that AI can be implemented safely into the private client toolbox to support
greater levels of efficiency, but in a way that removes both human and technological biases that have
been learnt from previous precedents. It is important that if the integration of AI happens in any
capacity, as either its own entity or as an assistive tool for practitioners, that it is done in a way that
ensures clients’ needs are put first and protected. 

[1] Tableau, ‘What Is the History of Artificial Intelligence (AI)?’

[2] Mata v Avianca 22-cv-1461 (PKC) (2023)

[3]Being a measure of uncertainty or unpredictability in the meaning of a piece of information, leading
to assumptions on the part of the AI model.

[4] Sebastian Farquhar and others, ‘Detecting Hallucinations in Large Language Models Using
Semantic Entropy’ (2024) 630 Nature 625, accessed 26 July 2024.

An original version of this article was first published by IFC Review, January 2025

Trust disputes

Cayman Islands trusts remain a popular way to preserve family assets and to control how, when, and in what amounts wealth is passed down to future generations. Settling assets on trust can serve important asset protection functions, and professional trustees can ensure that valuable family and business assets are protected for generations to come, even in the event of the all too common family breakdown among members of the beneficial class of the trust.

However, the role of trustee of a Cayman Islands trust is not one to be accepted on a whim. In a modern and highly regulated world, which now includes families who may have generated their wealth in novel ways and individuals with a greater propensity for litigation, the position can involve exposure to great risk and liability. Raw family wounds, generational rifts, and suspicions of wrongdoing are the bread and butter of trust disputes in the modern world and are on the rise.

Administering a trust can become even more complex if trustees face conflicting and hostile requests or demands from settlors or beneficiaries of the trust who (as is now increasingly common) are located in different jurisdictions and have competing interests, even if there is no allegation of breach by the trustee itself. When disputes arise, it can be very difficult to find an efficient solution, particularly if the risk of cross-border disputation is high. However, with careful management of these situations, and knowledge of external options for resolution including the Cayman Islands courts, all parties in a dispute can find a clear path forward.

The Cayman Islands Courts

Local legislation and regulations offer a number of avenues by which a trustee or other officeholder facing conflict involving a Cayman Islands trust can seek the assistance of the Grand Court of the Cayman Islands (the Court) to determine a potentially contentious matter or a resolution to a hostile dispute. Judicial independence is a core pillar of the legal system in the Cayman Islands, and the ability of the judges to perform their duties free of influence or control by others, whether governmental or private, ensures the proper administration of justice within the islands. With its widely respected judiciary and reputation for issuing important and robust judgments, the Court ensures that the jurisdiction is at the forefront of the development of modern trusts and estates law.

Trustees of Cayman Islands trusts are entitled under Section 48 of the Trusts Law (as revised) to apply to the Court for the opinion, advice or direction of the Court on any question concerning the management or administration of trust money or the assets of any estate. Such applications, in appropriate circumstances, can be made ex parte or, if acceptable to the Court, by written submissions without an oral hearing. As long as the trustee is not guilty of any fraud or misrepresentation in approaching the Court on this basis, they will be deemed to have discharged their duty as trustee when acting upon any order made by the Court.

Separately, the Grand Court Rules offer a solution. Order 85 sets out a procedure by which a trustee, beneficiary, or enforcer of a trust, or an executor or administrator of an estate, can make an application to the Court for the determination of any question arising in administration of the estate of a deceased person or in the execution of a trust. 

The circumstances in which private clients might need access to swift and robust justice from a respected and experienced judiciary are numerous. Some examples are discussed below.

Death of a matriarch or patriarch

One of the most common origins of a dispute involving a Cayman Islands trust is the unexpected passing of a settlor who leaves behind a valuable estate including family business and coveted assets (and, more often than not, family members from multiple marriages). The situation becomes particularly dire where the late settlor has not left a will, or if their assets are controlled by a trustee. In these circumstances the administrators of the deceased's estate, and/or the trustees of the relevant trust, may find themselves in the middle of a hostile battle for the estate assets, threaded with high emotions and unhealed family wounds. Unhappy family members who learn of these trusts may seek to challenge their validity in an effort to draw the assets back into the estate (and out to them as beneficiaries of the estate). Executors and trustees will need sound advice on the complicated rules surrounding probate and succession law in the Cayman Islands to avoid unnecessarily inflaming family disputes, so the assistance of the Court and its independent judiciary pursuant to the administration procedures mentioned above can be invaluable.

Marital breakdowns

Matters can also become complex for trustees of Cayman Islands trusts when marriages break down. Trustees may face requests for information about whether trusts contain marital assets, queries about how the trustee intends to administer the trust in the best interests of the family in light of a separation, and demands to partition the assets in light of a pending divorce. These interactions with settlors and beneficiaries must be carefully managed to ensure independence, neutrality, and adherence to relevant laws. Of course, when divorces become particularly hostile, the situation can deteriorate very quickly and the trustee can be drawn into all manner of contentious (and cross-border) applications as the battle begins over and accusations are made about ownership of trust assets. In these situations, the Court is available to guide the trustee of a Cayman Islands trust on the question of whether it is appropriate to submit to the jurisdiction of the foreign court, as well as to how the trust assets should be managed and/or preserved pending resolution of the dispute.

Paralysis

Where a trustee is unable to respond to or resolve requests and competing claims made by the settlor or beneficiaries to their satisfaction, the trustee may well find themselves in a situation where any move exposes them to potential liability and the threat of legal action. Decision-making can become very difficult and highly stressful, and in rare circumstances is virtually impossible because the trustee finds their interests in limiting their own liability conflicting with their duty to the trust. In this scenario, a trustee will likely find themselves effectively deadlocked. For trustees of Cayman trusts who are unable to find any sensible alternatives to the competing claims, which is a relatively rare scenario, the best (and possibly only) option will be to make an application to surrender their discretion to the Court. Assuming it is satisfied that there is good reason to do so, the Court has jurisdiction to step into the shoes of the trustee and determine how to exercise its discretion in order to find an appropriate path forward for all parties. This may include directions as to next steps, and sanctioning of conduct by the trustee having regard to all the material circumstances.

The importance of liquidity

Of course, all litigation inevitably involves legal expenses and court fees. While complex trust structuring offers a robust asset protection plan for individuals and families, when disputes arise it can also lead to headaches if liquid trust funds have been soundly ringfenced in underlying entities and cannot be easily accessed to fund the costs of obtaining, for example, legal or tax advice in response to challenges to the trust. Even trustees holding significant liquid trust funds may have severely restricted access to those funds by terms of the trust deed that prevents their use without the consent of a protector or enforcer (who in reality may be the party taking issue in respect of the trustee’s conduct). In some circumstances, the trustee must pay for urgently needed advice from their own pocket. However, the Court is also able to assist with the provision of directions and declarations as to the appropriate use of trust funds during hostile litigation.

Access to justice

Despite the minefield of potential issues that can arise in respect of a Cayman Islands trust or estate as outlined above, with careful and considered planning at the outset, and access to a respected and efficient judiciary to resolve points of contention if sensible discussions do not, disputes involving Cayman Islands trusts can be resolved expeditiously and sensibly in the short term. With this ultimate safety net supporting the careful considerations outlined above, tools are readily available to assist with effective conflict mitigation for families who have identified the Cayman Islands as their jurisdiction of choice.

An original version of this article was first published by The Alternative Investment Management Association (AIMA), November 2024

Over the past 30 years, the Cayman Islands has been the pre-eminent jurisdiction for the formation of alternative investment funds, with a strong track record of over 30,000 registered funds with the Cayman Islands Monetary Authority (approximately 13,000 regulated open-ended funds and 17,000 regulated closed-ended funds). This achievement consolidates the Cayman Islands’ position as the world’s leading funds jurisdiction, with further growth expected in the coming years. 

According to Cayman Finance, the current projections indicate the 2024 year-end total will surpass 2023’s registrations, building on the steady growth of private funds since the introduction of the Private Funds Act in 2020. Last year saw 16,551 private funds, the previous high for registrations, along with 12,802 as the prior high for mutual funds registrations.

This article will seek to highlight why the Cayman Islands continue to go from strength to strength, while substantiating the reasons why more fund managers across the globe seek to domicile their funds in the Cayman Islands.

Political and economic stability and sound legal system

As a British Overseas Territory, the Cayman Islands enjoy political and economic stability. The jurisdiction’s legal system is based on established English common law. Corporate and commercial statutes are continually being revised and improved in response to the demands of international commerce. The courts function effectively and smoothly and employ an investor-friendly and creditor-friendly approach. The final court of appeal is the Privy Council in London. The judiciary is sophisticated and many of the attorneys at Cayman Islands law firms have been sourced from top-tier international law firms. The Grand Court in the Cayman Islands also has a specialist division, the Financial Services Division, which is designed to focus on complex financial services matters and commercial litigation.

Speed of formation

Cayman Islands companies and limited partnerships can generally be formed on a same-day basis and the certificate of registration and other stamped documents will generally be issued by the Cayman Registrar’s office that day (if the entity is registered on an express basis).

Tax neutrality and absence of exchange controls

There are currently no forms of direct taxation in the Cayman Islands (i.e. no income, inheritance, gift, withholding, corporate or capital gains taxes) and no forms of exchange control. In addition, it is possible, but not obligatory, for exempted companies, limited liability companies, limited partnerships and trusts to order a tax exemption certificate, which provides comfort that future changes in the law will not result in that entity being subject to taxation in the Cayman Islands for a period of either 20 years (company) or 50 years (limited partnership, limited liability company or trust). In light of the tax neutrality, some have mistakenly coined the Cayman Islands a “tax haven” when, in fact, it imposes substantive indirect tax in the form of import duties and stamp duty.

Anti-money laundering regime

The Cayman Islands has a strong anti-money laundering regime and is committed to complying with its international obligations. It has signed a large number of tax information exchange agreements with other countries and territories and is on the OECD ‘whitelist’ of compliant jurisdictions. Having been removed from the Financial Action Task Force’s Grey List in October 2023 and the European Union’s Anti-Money Laundering blacklist in February 2024, it is a further recognition of the Cayman Islands’ robust AML/CFT regime and its commitment to adhering to international standards.

Cayman Islands Monetary Authority (CIMA)

CIMA oversees the regulation and supervision of financial services, the monitoring of compliance with money laundering regulations, and has issued regulatory handbooks on policies and procedures, rules and statements of principle and guidance applicable to regulated funds in the Cayman Islands. CIMA adheres to recognised international standards while at the same time ensuring that regulation is both necessary and proportionate. CIMA is a member of the International Organization of Securities Commissions, the principal global standard setting body for the regulation of securities markets. CIMA enjoys a close working relationship with, and regularly consults with, the private sector in developing a bespoke fund legislation over the years which is easy to understand and in line with global standards. 

Enforcement of foreign judgments

A judgment obtained in a foreign court will generally be recognised and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided that such judgment:

• Is given by a foreign court of competent jurisdiction;
• Imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;
• Is final and conclusive as between the parties thereto;
• Is in respect of a fixed sum of money and not for a tax, fine or penalty; and 
• Was not obtained by fraud or in proceedings contrary to natural justice and its enforcement is not contrary to the public policy of the Cayman Islands.

There is also direct statutory enforcement of judgment obtained in certain courts in Australia.

Arbitration

The courts of the Cayman Islands will generally recognise and enforce arbitral awards made pursuant to an arbitration agreement in a jurisdiction which is party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards unless one of the defences set out in section 7 of the Foreign Arbitral Enforcement Act (as revised) of the Cayman Islands can be established. In addition, the Arbitration Act (as revised) of the Cayman Islands (which provides a unitary regime of arbitration largely based on the UNCITRAL Model Law on International Commercial Arbitration) has also established the jurisdiction as a desirable place in which to conduct international arbitrations.

‘Onshoring’ vs ‘Offshoring’

In recent times, market observers in certain jurisdictions like Singapore, Hong Kong and Luxembourg have seen a rise in the uptake of ‘onshore’ vehicles by fund managers looking closer to home due to the enhancement of anti-financial crime measures globally along with the introduction of new fund structures and incentives to boost the asset management industry in such ‘onshore’ jurisdictions. Notwithstanding this observation, we nonetheless see a growing popularity and demand for Cayman Islands investment funds utilised throughout Asia. It is indeed not a ‘zero-sum’ game where managers choose to domicile their funds in only one jurisdiction to the exclusion of others. As fund managers deal with increasingly sophisticated investors from multiple jurisdictions and more complex regulatory environments for foreign investments, we are observing structures in different jurisdictions often used in tandem with each other to achieve different objectives.

From a Singapore and South East Asian perspective, we typically see a wide range of structures being utilised by managers which include Cayman Islands vehicles as either (i) the main fund, (ii) the feeder fund which in turn invests into an ‘onshore’ master fund vehicle (e.g., a Singapore variable capital company (VCC)) or an Australian unit trust), (iii) a parallel fund vehicle which invests alongside an ‘onshore’ vehicle, or (iv) in a purely Cayman Islands ‘master/feeder structure’. 

Conclusion

For the above reasons, the Cayman Islands continues to grow and build on its stellar reputation as the world’s pre-eminent funds jurisdiction over the last 30 years. That said, fund structuring is a multi-faceted process which should consider a wide range of factors, including but not limited to tax planning, commercial flexibility and investor familiarity. With increasingly complicated regulatory environments and cross-border investment considerations, the flexibility of the Cayman Islands regime ensures it will remain at the forefront of the global funds industry. 

Please reach out to your usual Carey Olsen contact, or one of the contacts listed in this article, if you require further guidance in relation to the above.

An original version of this article was first published by ThoughtLeaders4 HNW Divorce Magazine, November 2024

Divorce and financial remedy proceedings are frequently characterised by a lack of trust between parties. Warring spouses may try various tactics to put assets beyond their spouse's reach during proceedings or following judgment. This can include using existing offshore structures or accounts or setting these up specifically to move assets offshore. It is important to be aware that steps can be taken to stop illegitimate movement of assets by parties, including from offshore jurisdictions.

The offshore jurisdictions we work in – Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey and Jersey (which we will refer to in this article as the "Offshore Jurisdictions") – are self-governing, with their own governments, legal systems and laws. These offshore jurisdictions are highly regulated and guided by the principle of comity. Where there is concern that a party is improperly seeking to dispose of assets or put them beyond the reach of the parties' home courts via the use of an offshore structure or account, it is prudent to seek early advice in the relevant jurisdiction to understand what action can be taken to secure the relevant assets. Complex financial remedy proceedings can be lengthy and there can be significant value in ensuring that assets are preserved to meet a spouse's claims.

The purpose of this article is to give any onshore practitioners who are not already familiar with the procedure associated with seeking a freezing order in the Offshore Jurisdictions a practical insight into the approach taken by the courts to the granting of freezing injunctions in matrimonial cases.

When will a freezing injunction be granted?

Freezing orders can be granted in the Offshore Jurisdictions in relation to proceedings that have (or will be) commenced in the respective jurisdiction, or in support of proceedings in foreign jurisdictions. Freezing injunctions can have worldwide effect and prohibit the defendant from dealing with their assets in any jurisdiction. An application for a freezing order may be made before or at any stage after the commencement of proceedings (including after judgment).

The applicable test taken in the Offshore Jurisdictions mirrors that in England and Wales. The applicant must have a good arguable case in the substantive proceedings in support of which the order is sought, and it must be just and convenient to grant the injunction. It must be shown that a freezing injunction is needed to prevent asset dissipation, and the risk that assets will be dissipated must involve more than merely the fact that the defendant resides outside of the jurisdiction. The greater the delay in bringing the application, the more difficult it will be to satisfy the Court that there is a risk of dissipation. It is therefore important that advice is sought in the relevant foreign jurisdiction as quickly as possible.

Practical issues to consider

Where a freezing order is sought in respect of assets or monies held by the defendant in an offshore financial institution (such as a bank or trust company), it may be prudent to cite the relevant institution in the application. It is also usual to seek a disclosure order from the institution as part of the application. The Offshore Jurisdictions are international financial centres and financial institutions in these jurisdictions are well-versed in being cited in such applications. In our experience financial institutions understand that they are innocent parties caught up inadvertently in the proceedings and are bound to comply with the relevant court order. Once the financial institution has been served with an injunction, it will be bound by its terms and will be in contempt of court should it deal with the defendant's assets, or allow the defendant to deal with the assets, in a way that is inconsistent to the terms of the injunction. A bank's contractual duty to its client is overridden by the injunction.

Complexities can also arise if the freezing injunction concerns assets held through a trust, in which case it is necessary to consider which legal entities or individuals should be the respondents to the application.

A freezing injunction will ordinarily not prevent the defendant from using the relevant monies to pay their reasonable living or ordinary business expenses and legal fees, unless they have alternative funds available upon which to draw for this purpose.

The applicant must give an undertaking in damages as a condition of the injunction, whereby the applicant undertakes to pay damages to the defendant if the injunction is found to have been wrongly granted. This is often referred to as the ‘price’ of obtaining a freezing injunction and, given the large sums commonly involved, this undertaking can require fortification by the provision of some form of security, such as a payment into court or a bank guarantee.

Even if all of these requirements are satisfied, the court has a discretion whether or not to grant a freezing injunction and will only make the order if it considers it just and convenient to do so.

Due to the fear that, if they have notice of the application, the defendant will take steps to remove assets from the jurisdiction and put them beyond the reach of the court, it is usual for applications to be made on an ex parte without notice basis, to avoid any risk of the defendant being tipped off before the injunction has been granted. The applicant must make full and frank disclosure of all facts and matters which it is material for the judge to know.

If the injunction is granted, the defendant will have the opportunity to seek to overturn the injunction at a return date hearing, typically held a few weeks after the ex parte hearing. Common grounds for seeking to overturn the injunction include the defendant asserting that there is no risk of dissipation of the relevant assets, attacking the applicant for failing to disclose all material facts to the Court or questioning the applicant's ability to meet the cross-undertaking in damages.

Applications for freezing orders require careful and strategic consideration, whilst simultaneously moving forward with the requisite urgency to ensure that assets are not dissipated in the meantime. The importance of seeking sensible, expert legal advice as soon as possible cannot be overstated.