cayman islands – Nelsons

Liquidating a Solvent Company in the Cayman Islands

June 2024 A solvent Cayman Islands company may be dissolved in one of two ways (i) by voluntary liquidation; or (ii) strike off. Under the Companies Act (as revised) (Companies Act), a Cayman company is regarded as solvent if it can pay its debts as they fall due in the ordinary course of business. This is particularly important in relation to voluntary liquidation. If during the voluntary liquidation or after the process is complete, the relevant company was not solvent, the directors may face harsh consequences, including fines and imprisonment. Strike-off In certain circumstances, the directors of a company may apply to the Registrar of Companies (Registrar) to have the company struck off the Company Register of the Cayman Islands. This procedure is only appropriate where the company: is not conducting any business and ideally have never operated; and has no (or only nominal) assets and liabilities. Although the procedure to strike off a company is more straight forward and less expensive than a voluntary liquidation, a struck- off company may face potential issues in the future. Such issues include, but are not limited to: any aggrieved creditor or shareholder applying to court to have a struck-off company reinstated within two years of the date of its strike-off (or up to 10 years if the Cabinet of the Cayman Islands allows) as permitted under the Companies Act. As a result, a strike- off does not ensure the end of the company's life. to reinstate the company, it will need to pay annual fees and penalties for the period from strike-off to reinstatement. as a result of reinstatement, the court has the power to award damages to any person to return them to the position they [...]

2024: What to Expect from the Cayman Beneficial Ownership Regime

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). [...]

Corporate Governance Update: Cayman Islands Regulated Funds

April 2024 A year since the introduction of the updated regulatory measures by CIMA on corporate governance for regulated entities. How are the rules and guidance being implemented by funds? The Cayman Islands Monetary Authority (CIMA) released updated regulatory measures in April 2023 in relation to the rule on corporate governance for regulated entities (Rule) and associated statement of guidance for mutual funds and private funds (Guidance). The Rule has been effective since 14 October 2023. The Rule introduced numerous changes to the previous corporate governance obligations for regulated entities and extends to private funds, which was not previously included. The Rule creates binding requirements on all entities regulated by CIMA. A breach of a Rule could lead to the issuance of a fine or enforcement action taken by CIMA. What is the purpose of the Rule and the Guidance? Pursuant to the Rule, the governing body (i.e. the board of directors, general partner or managing members depending on the entity structure) of a regulated entity (Governing Body) must establish, implement, and maintain a corporate governance framework which provides for sound management oversight and protects the legitimate interests of relevant stakeholders. The Guidance is expected to assist the Governing Body of mutual funds and private funds with interpreting the Rule for implementation in a fund context. How are funds implementing the Rule and Guidance? Funds are implementing a corporate governance manual by pulling together all their operational policies and procedures into one clear and simplified manual that cover the requirements outlined in the paragraph headed ‘What are the required Governance measures?’ below. Even though the minimum requirement for funds is for the Governing Body to meet on an annual basis, we have been assisting [...]

An Introduction and Overview of Features of the Cayman Islands Limited Liability Company

Introduction The Cayman Islands Limited Liability Company (LLC) regime came into operation on 13th July 2016 following the 8th July publication of The Limited Liability Companies Law, 2016 (Commencement) Order, 2016. Also on 13th July 2016 regulations were published setting out a schedule of fees and setting out requirements for a translator’s certificate where a foreign language name is adopted. The Limited Liability Companies Act 2021 ( “the Act”) which provides for this new kind of Cayman Islands vehicle was enacted on 5th February 2021. An LLC is similar to a Delaware limited liability company. It is a hybrid business vehicle with separate legal personality (like a Cayman Islands exempted company), but with certain features and flexibility akin to a Cayman Islands exempted limited partnership (including, with reference to the nature of a member’s interest in an LLC, the manner in which accounts are maintained and with parties having substantial freedom of contract amongst themselves to determine the LLC’s governance and other internal workings). The LLC Act also allows for existing companies to convert into LLCs, for the merger or consolidation of an LLC with an exempted company or a foreign company and permits transfers by way of continuation into or out of the Cayman Islands. Formation and Registration The registration of an LLC is effected by the payment to the Register of Limited Liability Companies, maintained by the Registrar of Companies of the registration fee and by the filing with the Registrar of a registration statement signed by or on behalf of the party forming the entity which shall contain: a) The name of the limited liability company and, if applicable, its dual foreign name together with its translated name; b) The address [...]

Reduction Of Share Capital Of An Exempted Company Incorporated Under The Laws Of The Cayman Islands

It may from time to time become necessary to reduce the share capital of a company, whether because the original share capital may have been lost through trading or because the company may find it has more resources than it can profitably employ, or for other reasons. On the premise that creditors may rely on the value of a company’s issued share capital as a possible fund from which their claims may be satisfied, it is a general principle of the Companies Act that capital cannot be reduced without the consent of the Court. The Court will be concerned to ensure that the rights of the creditors are not prejudiced by a reduction and that the reduction is fair and equitable as between any different classes of shares in the capital of the company. An application under Section 15 of the Companies Act confirming a special resolution for reducing the share capital of a company must be made by petition. Such a petition may be served out of the jurisdiction of the Cayman Islands upon any shareholder, director or creditor of the company concerned, without leave of the Court. Upon the issue of the petition, the petitioner must at the same time take out a summons for directions, and both must simultaneously be served on the company. On hearing of the summons for directions, the Court may by order give such directions as to the proceedings to be taken before the hearing of the petition as it thinks fit, including in particular directions for the publication of notices and the making of any inquiry. These may include directions: a) for an inquiry to be made as to the debts of, and claims against the [...]