Cayman Islands – advantages as an offshore jurisdiction
The Cayman Islands are one of the main offshore jurisdictions in the world. Although particularly well-known for building investment funds (both hedge funds and private equity funds), Cayman Islands entities are typically used for transactions of all types, including market transactions. equity, debt and insurance, in mergers and acquisitions and in joint ventures. The Cayman Islands Monetary Authority (CIMA) oversees and regulates providers of a wide range of financial services, including banking, insurance, and investment management.
The Cayman Islands have no direct taxes of any kind. There is no corporation, capital gains, income, profits or withholding taxes. Under the terms of the relevant legislation, it is possible for exempt companies, unit trusts and limited partnerships to register with the government of the Cayman Islands and apply in writing to undertake in writing to remain exempt from tax. tax for a minimum period (20 years for exempt corporations and 50 years for unit trusts and limited partnerships).
Lack of exchange controls
There are no currency control restrictions or regulations in the Cayman Islands. Funds can be freely transferred in and out of the islands in unlimited amounts. The Cayman Islands dollar is pegged to the US dollar and the US dollar is freely accepted and used in the local economy.
Reliable legal system
Cayman Islands law derives from English common law, supplemented by local law. The judicial system is well developed and experienced. Major civil cases are heard in the Grand Court with appeals to the Cayman Islands Court of Appeal and ultimately to the London Privy Council. It is common for the UK’s leading lawyers to appear in Cayman Islands courts for major disputes.
Availability of banks and professional services
Of the 50 largest banks in the world, more than 40 are present in the Cayman Islands. All the major accounting firms are represented on the islands. Institutions and arrangers doing business in the Cayman Islands also benefit from top notch professional service providers (lawyers, fund administrators, trust companies, business leaders, etc.) with extensive experience.
Speed and cost
Since Cayman entities can be incorporated on deposit day and there are no regulations or lengthy deposit procedures, transactions can be brought to market very quickly. The cost of forming and maintaining Cayman entities is competitive and generally minimal in the context of most transactions.
Political and economic stability
The Cayman Islands are a British Overseas Territory and have a history of stable government. The UK government retains responsibility for internal security, defense and external affairs. Prudent economic policies and a strong financial services sector have enabled the islands to benefit from an Aa3 sovereign risk rating. The islands enjoy a high standard of living.
The Cayman Islands are located in the western Caribbean, 480 miles south of Miami and 180 miles northwest of Jamaica. The islands are five hours behind Greenwich Mean Time in the Eastern Time Zone. The islands enjoy advanced telecommunications facilities and direct flights are available from a number of major international hubs.
Cayman Islands Monetary Authority
CIMA’s mission is to regulate and oversee the financial services industry in order to maintain a world-class financial system. CIMA takes into account international standards and the need for operational freedom of financial service providers and the maintenance of a dynamic and competitive industry. CIMA currently regulates over 11,000 open-end mutual funds and over 12,000 closed-end funds or private equity funds (referred to herein as private funds).
Cayman Islands Stock Exchange
The Cayman Islands Stock Exchange (CSX) was established in 1997 to provide a highly competitive listing mechanism for specialty products, mutual funds and Cayman debt securities. Since then, CSX has broadened its listing possibilities for derivative warrants, certificates of deposit and bonds in euros. CSX has admitted over 5,000 stocks and currently maintains a market capitalization of over US $ 372 billion.
Fight against money laundering
The Cayman Islands have long been committed to implementing international best practices in line with the requirements of the Organization for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF). A comprehensive legislative framework has been adopted to combat money laundering, combat terrorist financing and combat proliferation financing.
Cayman Islands entity types
Below we give a very brief summary of the main characteristics of the Cayman Islands entities.
Cayman Islands exempt companies have separate legal personality. They only need one shareholder and there is no minimum capital requirement. Shares can be denominated in any currency and denomination. There is no minimum or maximum amount prescribed for authorized issued or paid-up share capital.
A Cayman Islands company is required to maintain a registered office in the Cayman Islands. Mourant Governance Services (Cayman) will generally act as the head office for the companies we incorporate. Subject to solvency considerations, dividends or other distributions are payable to investors from amounts credited to a company’s share premium account, even if no profit is available.
Shares of a Cayman Islands company can also be repurchased or repurchased from capital, again, subject to solvency considerations. For the statutory separation of assets and liabilities between the sub-portfolios of the same company, separate holding companies can be created.
There is no statutory restriction on the issuance of debt securities by Cayman Islands corporations. Cayman Islands law recognizes a number of different types of asset security interests.
The management of a company is generally delegated to its board of directors. However, it is possible that an “ exempt limited time ” company will be incorporated (which can be governed by its shareholders), or a limited liability company or “ LLC ” will be formed (which can be run by its members and / or officers) under the terms of its constitutional acts. These constitutional documents can be tailor-made and can, if necessary, be supplemented by a shareholders’ agreement.
Although a corporation’s constitutional documents must be registered with the Cayman Islands Registrar of Corporations, they are not accessible to the public.
Cayman Islands Trust Law is based on English common law and is therefore interpreted according to English case law, as amended by any Cayman case law. Under a unit trust agreement, investors (or unitholders) pay funds to a trustee who holds those funds in trust for unitholders, and each unitholder is directly entitled to share. pro-rated the assets of the trusts.
Exempt limited partnerships (PEL s) are the most common vehicle for private funds. They are also sometimes used in master-feeder variable capital fund structures.
A partnership registered as a PEL, in addition to limited partners, must have at least one general partner who: if an individual, resides in the Cayman Islands; whether a company is incorporated in the Cayman Islands or registered as a foreign company; or if a partnership, is registered in the Cayman Islands.
The General Partner is responsible for the conduct of the affairs of PEL and it (rather than the Limited Partners) is responsible for the debts or obligations of the Partnership, except as otherwise specified in the Partnership Agreement.
A PEL does not have a separate legal identity from its partners and therefore any PEL property held in the name of the General Partner or in the name of the PEL will be deemed to be held in trust by the General Partner as an asset. of the ELP. Limited partners have limited liability (limited to the amount of capital advanced to the partnership), but must not take part in the conduct of the affairs of a PEL and to do so would risk making that limited partner liable for the debt and of the obligations of the PEL, if the PEL becomes insolvent.
The Cayman Islands has a well-established and flexible trust regime that allows for the protection of privacy and assets, both in the areas of commercial and private wealth. For example, if a trust company incorporated in the Cayman Islands only conducts “ connected trust business ”, it may register as a private trust company (PTC) with CIMA. The PTC has proven to be a particularly attractive structure for affluent families who are, for example, sensitive to confidentiality issues, or who wish to retain some control or influence over the administration of the trust assets, which may include shares in a family business. . PTCs can also be used in a philanthropic or business context.
For business purposes, especially where a special purpose vehicle is incorporated for the purpose of a particular transaction, special trusts (alternative regime) (STAR) under Part VIII of the Trust Act (2021 Revision) may be used to have the shares of the special purpose vehicle vested in the STAR Trustee for the purpose of exercising his voting rights to advance the transaction in question.