The Cayman Islands will be implementing enhancements to the beneficial ownership regime currently in place during the course of 2024.

The Beneficial Ownership Transparency Act 2023 (Act) was passed by the Cayman Islands Parliament on 23 November 2023. The Act is not yet effective, and we will keep you updated as to the implementation process over the course of 2024.

The key aim of the Act is to pull together the various rules relating to beneficial ownership currently split between several laws and regulations for specific types of entities, into a single piece of unified legislation. At present, the beneficial ownership provisions for companies, limited liability partnerships (LLPs) and limited liability companies (LLCs) are set out respectively in the Companies Act 2023 (Revised) (Companies Act), the Limited Liability Partnership Act (2023 Revision) and the Limited Liability Companies Act (2023 Revision). The Act will consolidate, and therefore simplify the beneficial ownership regime to ensure a consistent approach to the treatment of in-scope entities.

The current beneficial ownership regime applies to companies incorporated under the Companies Act, LLCs and LLPs. The Act will extend the regime to foundation companies, limited partnerships and exempted limited partnerships. The expansion of the regime to these entities will be in stages and will give the in-scope entities time to assess their obligations and, where required, to adhere with their obligations to establish a register of beneficial ownership.

The Act amends the definition of “beneficial owner” so that it is more aligned with the definition under the Cayman Islands Anti-Money Laundering Regulations (the AML Regulations), save that the relevant percentage for determining “control” will remain at 25% or more (not 10% or more, which is the threshold under the current AML Regulations). This amendment seeks to increase consistency across the laws of the Cayman Islands where the construct of “beneficial owner” is used.

The Act (once effective) removes most of the previous exemptions that exclude certain entities from the requirement to maintain beneficial ownership register. These include:

  • an entity which is, or a subsidiary of an entity which is, managed, arranged, administered, operated, or promoted by an “approved person” as a special purpose vehicle, private equity fund, collective investment scheme or investment fund (or the general partner of such a vehicle, fund, or scheme). This exemption is not included in the Act but an alternative route to compliance has been provided, specifically for investment funds registered with the Cayman Islands Monetary Authority (CIMA) under the Private Funds Act or the Mutual Funds Act, which will not be required to establish or maintain beneficial ownership register. Rather, such registered funds are required to provide the contact details of a licensed fund administrator, or another contact person licensed or registered under a regulatory law for providing beneficial ownership information located within the Cayman Islands i.e. the registered office provider.
  • Investment structures and entities which do not need to register under the Private Fund Act or Mutual Fund Act will be required to establish or maintain a beneficial ownership register, for example, single investor funds. These types of ownership structures tend to have a beneficial owner who is an individual who exercises ultimate control over the management of the entity and/or is a director or manager of the entity.
  • Entities registered with CIMA under the Securities Investment Business Act, or the Virtual Asset (Service Providers) Act are not included in the exemptions in the Act, although they may fall under the category of being licensed under a regulatory law and may or may not be required to establish and maintain a beneficial ownership register.

In November 2022, the European Court of Justice ruled that publicly accessible beneficial ownership registers amounted to a breach of the fundamental rights to (i) respect of person’s private life, and (ii) protect personal data (Articles 7 and 8). Please note that the changes contemplated by the Act do not extend to the beneficial ownership registers being made available to the general public. The Cayman Islands retains, as is common practice, in its dealings with competent authorities, the ability to share beneficial ownership information where necessary to combat financial crime money laundering and terrorist financing.

Our regulatory team will be happy to assist you with any questions or queries you have regarding your regulatory requirements in the Cayman Islands.

Please contact loseland@nelsonslegal.com for further details and assistance.