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LOWTAX OFFSHORE

CAYMAN ISLANDS : TYPES OF COMPANY


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BACK TO CAYMAN ISLANDS INFORMATION: BUSINESS, TAXATION AND OFFSHORE

On this Page:

- CAYMAN ISLANDS ORDINARY RESIDENT COMPANY
-
CAYMAN ISLANDS EXEMPT COMPANY
- CAYMAN ISLANDS ORDINARY NON - RESIDENT COMPANY
- CAYMAN ISLANDS LIMITED DURATION EXEMPT COMPANY
- CAYMAN ISLANDS FOREIGN COMPANY
- CAYMAN ISLANDS EXEMPT LIMITED PARTNERSHIP
- CAYMAN ISLANDS LIMITED PARTNERSHIP
- CAYMAN ISLANDS TRUSTS


The Companies Law 1961 (as amended, chiefly in 1990 and 1995) is based on English law and is the main law governing companies in Cayman. There are four company types which are commonly registered in Cayman under the Companies Law: Ordinary Resident Company, Ordinary Non-Resident Company, Exempted Company and Exempted Limited Duration Company.

The Companies Law, true to its English origins, permits companies limited by shares, companies limited by guarantee, and unlimited companies; but in practice only companies limited by shares are used. Incorporation and registration of limited companies takes a day, and it can be less. Shelf companies are available but are unusual.

There is a Registrar of Companies, and registration involves submission of the Memorandum of Association; for companies limited by shares the Articles of Association can follow - 'Table A' applies if no Articles are registered.

There needs to be one shareholder of record (of any nationality); there are no rules regarding minimum capital, par value etc. There is no statutory requirement for audit or for annual filing of accounts. All companies must maintain registered offices in Cayman.

However, pressure from the OECD and other international bodies on the Cayman Islands to take steps to counter money-laundering has led to the imposition of more stringent 'KYC' rules on the offshore sector.

The Cayman Islands General Registry reported that active companies registered in the Cayman Islands grew by 10% in 2007 to 87,230 companies, compared with 79,227 companies registered in 2006. The Registry is actively targetting more company registrations from overseas, and the introduction of a new Arabic language facility in 2007 should ensure more business from the Middle East.

A number of fees affecting entities in both the offshore and domestic sectors increased from 1st July, 2006. The most significant change pertained to the issuance of Certificates in respect of companies listed on the Companies Registry. The fee for obtaining a Certificate of Good Standing increased from CI$41 to $82.

The government of the Cayman Islands has proposed changes to aspects of the jurisdiction's companies law, aimed at simplifying the legislation and making the provisions more suitable to the needs of the Cayman Islands financial services industry.

A bill to repeal and replace part five of the Companies Law in order to reform the legislation relating to the winding up of companies was published as Supplement No. 1 of Gazette No. 18, dated 3 September, 2007 and recieved approval from Governor Stuart Jack on October 19 that year.

The legislation reflects the Law Reform Commission's 2005 recommendations, following a four-year private sector review of Cayman's corporate insolvency law.

Included in the Commission's recommendations were:

  • Repealing and replacing the existing law relating to corporate insolvency, noting that it was unduly complex and out of date;
  • Establishing an Insolvency Rules Committee for formulating insolvency rules which meet the needs of the Cayman Islands financial services industry, given that the practice of applying foreign insolvency rules to the Islands does not work satisfactorily;
  • Codifying and incorporating into a new part of the Principal Law international cooperation with respect to insolvency matters, given that the basis of cross-border cooperation relative to insolvency matters depends largely upon judicial practice.




Cayman Islands Ordinary Resident Company

An ordinary resident company is usually formed for the purposes of carrying on local business. In addition to the Companies Law, it is subject to the terms of the Local Companies (Control) Law 1995 which requires licensing, and the annual submission of a list of shareholders. Only registered, and not bearer, shares are allowed. An annual general meeting must be held, and a register of members must be kept at the registered office, open to public inspection. The name of the company must end in Ltd or Limited. The list of shareholders of the company must be filed with the Registrar of Companies in January each year; the Immigration Board should also receive a similar list showing those shares beneficially owned by Caymanians. Registration fees are payable on incorporation and annually: CI$150 for capital not exceeding CI$42,000, CI$350 otherwise.

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Cayman Islands Ordinary Non-Resident Company

An ordinary non-resident company is subject to the same rules as a resident company, but under the terms of the Local Companies (Control) Law 1995, must not conduct any business within the islands. This form, or that of the exempt company, is the usual choice for offshore operations. The Financial Secretary will grant a certificate of non-residence if he is satisfied that the company does not and does not intend to trade onshore. The company is then relieved of the licensing requirement and the need to provide lists of shareholders to the Immigration Department. An annual list must still be provided to the Registrar, but it is quite usual to appoint proxies.

The normal minimum capital requirement is CI$42,000, and the minimum capital duty levied on incorporation of a nonresident company and annually thereafter is CI$400; for higher capital the rate is CI$565. There are no restrictions on the location of general meetings or of directors or the secretary, if there is one, except that one shareholders' meeting must be held in Cayman each year.

Records of members, directors, mortgages and charges must be kept. Financial records must be maintained although no audit is necessary and there are no filing requirements.

Ordinary non-resident companies can apply to convert to exempted companies.

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Cayman Islands Exempt Company

The differences between a non-resident company and an exempted company are as follows:

  • An exempted Caymans company does not have to use Ltd or Limited in its name;
  • it may issue bearer shares in addition to registered shares;
  • it has to hold one directors' meeting a year in Cayman (but may use proxies);
  • it does not have to hold a shareholders' meeting in Cayman;
  • it need not file a list of shareholders annually, and does not even have to keep such a list;
  • it may obtain a Certificate of Tax Exemption (ie against any future Cayman taxation)

A revision to the Companies Law in 2007 removed the need for exempted companies to hold an annual meeting in the Cayman Islands.

An exempted company (or limited duration exempted company) is the normal form of choice for collective investment vehicles. Incorporation fees depend on capital as follows:

  • CI$470 for capital less than CI$42,000
  • CI$660 for capital up to CI$820,000
  • CI$1,384 for capital up to CI$1.64m
  • CI$1,968 thereafter.

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Cayman Islands Limited Duration Exempt Company

Limited duration exempted companies are like exempted companies except that:

  • The Memorandum of Association must limit the life of the company to 30 years or less;
  • certain events are specified which automatically precipitate its voluntary winding-up and dissolution;
  • it must at all times have not fewer than two members;
  • the Articles may provide that no shares may be transferred without the agreement of all shareholders; and
  • management may be carried out by the shareholders or may be delegated to a board of directors.

The name of the company must include at its end “Limited Duration Company” or “LDC." Fees are as for exempted companies, plus $200.

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Cayman Islands Foreign Company

Foreign companies are companies incorporated outside the Cayman Islands which establish a place of business, or carry on business in Cayman (which includes the sale by or on behalf of the company of its shares or debentures). Under the Companies Law a foreign company must register, providing the following information:

  • a copy of its incoporation documentation in English;
  • the names and addresses of its directors; and
  • the name of a person in Cayman who can accept service on the company's behalf.

There is a fee of CI$850 on registration, and CI$850 annually thereafter.

A company can also transfer its domicile to the Cayman Islands 'by way of continuance' which obviates the need to incorporate afresh. The reverse process is also possible.

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Cayman Islands Limited Partnership

Cayman Islands partnership law is based on English law, with recent amendments. Limited Partnerships are formed under the Partnership Law 1995. One or more general partners have unlimited liability and are responsible for management; limited partners are liable only to the extent of their contributions.

To form a limited partnership a declaration must be filed with the Registrar of Limited Partnerships which describes all the partners and gives other information; this declaration is also published in the Cayman Gazette.

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Cayman Islands Exempted Limited Partnership

A limited partnership may become an exempted limited partnership, or one can be formed de novo, by filing a statement with the Registrar. Unlike the Limited Partnership declaration, this does not need to include the names of the limited partners or the amounts of their contributions.

An exempted limited partnership must not do business with the public in Cayman. An exempted limited partnership may obtain a 50-year Certificate of Tax Exemption (ie against any future Caymans taxation).

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Cayman Islands Trusts

Trust law in the Cayman Islands is based on English trust law, with some recent modifications in the Trusts Law 1996. Other recent changes include the Perpetuities Law 1985 which increased the perpetuity period to 150 years, the Special Trusts (Alternative Regimes) Law which introduced purpose trusts, the Trust (Foreign Element) Law 1987 which provided inter alia for the importation and exportation of trusts, and the Fraudulent Dispositions Law 1989 which includes specific asset protection provisions. See Offshore Law for a fuller description of the legal regime for trusts. Appeal is to the Privy Council.

Trusts do not have to be registered; a company offering trust services must obtain a licence under the Banks and Trust Companies Law 1995; individuals do not have to do so. See Offshore Business Sectors: Trust Management

Trusts can be exempt, like companies and limited partnerships, but must then be registered with the Registrar of Trusts, and pay a fee of CI$400 (CI$100 annually thereafter; this was increased to CI$500 as from 1st July, 2006). The Governor gives a 50-year undertaking to the Trustees that no taxation will be imposed on the trust.

The Hague Convention has not been implemented in Cayman. Specific provisions exist for the non-recognition of foreign judgements and the exclusion of forced heirship.

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