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The
Companies Law 1961 (as amended, chiefly
in 1990, 1995) is based on English law
and is the main law governing companies
in Cayman. The law was updated, revised
and consolidated in 2004 and 2007. The
most recent revision came with the Companies
(Amendment) Law, 2009, effective May 11,
2009, which introduced a simpler mechanism
for company mergers and consolidations
without the need for court approval.
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. There were more than 94,000 companies
registered as of October 2009.
A
number of fees affecting entities in both
the offshore and domestic sectors increased
in 2006 and 2009. The December 2009 budget
announcement proposed that annual company
fees for resident, non-resident, exempt
and foreign companies would increase to
between KYD150 and KYD500. General Registry
fees including certificates, certifications,
express filings, new company registrations,
filings, name reservations and new company
registrations, would also increase.
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 September
3, 2007 and received 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$300 for capital not exceeding
CI$42,000, CI$500 otherwise.
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$575;
for higher capital the rate is CI$815.
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.
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, but they must be held by an authorized
depositary;
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:
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 incorporation 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$1,350 on registration,
and CI$1,350 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.
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.
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).
Trust law in the Cayman Islands is based
on English trust law, with some recent
modifications in the Trusts Law 1996 and
the Trust Law (2001 Revision). 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$500. 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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