Cayman Islands: Law of Offshore
Cayman Islands trust law is based on the Trust Law 1967, itself very similar to the English Trustee Act 1925. However, there has been considerable subsequent legislation which has distanced Cayman trust law from its English origins. In particular, Cayman has chosen, unlike England, not to adopt the Hague Convention, preferring to maintain the flexibility to set its own path. The most important recent pieces of Cayman trust legislation are as follows:
- the Perpetuities Law 1985 introduced a perpetuity period of 150 years, plus a 'wait and see' rule whereby a disposition or power will only fail when it tries to bite outside the perpetuity period.
- the Trust (Foreign Element) Law 1987 strengthened the validity of Cayman trust law, established importation and exportation of trusts, provided for the non-enforcement of foreign judgements, and specifically excluded forced heirship provisions (all of this making Cayman trusts more attractive in civil law jurisdictions in particular);
- the Fraudulent Dispositions Law 1989 replaced the Statute of Elizabeth, and strengthened the defences of a Cayman trust against creditors, as long as the trust is not bankrupt in Cayman. There is a 6-year limitation period on creditors' claims.
- the Special Trust (Alternative Regime) Law 1997 introduced purpose trusts.
- the Trust Law 1996 introduced exemption of trusts, whereby in exchange for registration with the Registrar of Trusts they can obtain a 50-year undertaking from the Governor to the Trustees that the trust will not be subject to any future Cayman taxation. Trusts do not otherwise require to be registered in Cayman.
The Banks and Trust Companies Law 1995 introduced licensing for companies providing trust services; the Law was amended in 2001 and 2003 and revised in 2007. Trust licenses are now as follows:
- Trust licences, covering the conduct of trust business within and outside of the Islands but subject to such conditions as may be imposed by the Authority
- Restricted Trust licences, covering the conduct of trust business with the restriction that the licensee shall not undertake trust business for persons other than those listed in any undertaking accompanying the application for the licence;
- Nominee (Trust) licences, covering trust business under a Trust licence to a licensee which is a wholly-owned subsidiary of another licensee and where the sole purpose of that subsidiary is to act as its nominee.
Trust Licenses require a minimum net worth of USD400,000; Restricted Trust Licences and Nominee (Trust) Licences require a minimum net worth of only USD20,000. The parent of a Nominee Trust company must provide a guarantee of not less than USD200,000. Licensees do not need to be Cayman companies; but foreign licensees will probably have to provide a head office guarantee. All applications include considerable amounts of administrative and financial information.
Companies holding any type of trust licence must have a place of business in the Islands, approved by CIMA, which will be its principal office in the Islands; and must have two individuals or a body corporate, approved by CIMA, resident or incorporated in the Islands, as its agent. Any trust licensee incorporated in the Cayman Islands must submit annual audited accounts to CIMA.