CAYMAN ISLANDS – EXEMPT COMPANIES
The Cayman Islands are a British Crown Colony consisting of 3 islands in the Caribbean lying approximately 480 miles south of Miami, Florida.
The area is about 260 square kilometers and consists of Grand Cayman and the “sister islands” of Cayman Brac and Little Cayman.
Grand Cayman, the largest of the three islands, is the only significantly populated island with 58,000 habitants, of which approximately 29,000 are residents in George Town, the capital.
The Cayman Islands boasts a prosperous economy, supported by the finance and tourism industries.
The cost of living is extremely high and over-employment exists.
Petty crime is rare and the islands are well looked after (described as “a very clean sandbank”) with more than 500 banks operating there.
The Islands are a largely self-governing British Crown colony and have traditionally been run by well-educated and forward-thinking Caymanians.
There is complete social harmony and the Caymanians share a preference to remain a British territory.
Britain is responsible for internal security and defense.
The legal system is based on English Common Law and is complemented by local laws.
Highligths of Cayman Islands exempted limited partnerships
There are two principal types of companies suited for international operations, which are: The ordinary (non-resident) and the exempt, both types of companies limited by shares.
Structurally, both are the same type of Limited Liability Company. However, the Financial Secretary certifies a non-resident company, as a company, which does not intend to carry on business within the Cayman Islands.
An exempt company, instead, has applied for and been granted “exempt” status by the Financial Secretary and cannot carry on business in the Islands either.
An exempt company may issue bearer shares as long as the company does not intent to hold property in the Cayman Islands.
Bearer shares must be held by an approved custodian. An ordinary non-resident company may not issue bearer shares.
The exempt company files annually a compliance statement, instead of a detailed annual return.
An exempt company can be granted an exemption from future taxes for a period of 20 years, which is renewable.
However, it should be noted that there are no taxes in the Cayman Islands anyway.
Exempt companies are not permitted to own land in the Cayman Islands.
A specific legislation introduced the new concept of an “Exempted Limited Duration Company”.
A limited duration company is a company that has at least 2 subscribers or 2 members; a Memorandum of Association which limits the duration of the company to a period of 30 years or less; and the name of the company includes at its end “Limited Duration Company” or “LDC”.
Name: Ordinary (non-resident) must utilize the word Limited or Ltd.
in their ending, while exempt companies can use virtually any ending, and do not have to specifically connote in the name that the liability is limited.
However, it is the practice to use the common endings that include limited liability, i.e.: Inc., Corp., S.A., A.G., Ltd., etc.
No Company may use the word bank, trust, insurance, etc., unless a special license is obtained.
Similarly, without the approval of the Registrar, no name that is considered to suggest a connection with any public board, local authority, or royal connection is permitted.
A corporate name can be confirmed on the same day as requested.
Overseas Management Co. presents M&A to the Registry the same day we receive instructions to proceed.
Nevertheless, the constitution generally takes from three (3) to five (5) working days.
Capital / Shares: There is no statutory minimum share capital other than the smallest unit currency in which the capital is authorized.
The maximum capital that pays the minimum registration and annual license fee are US$50,000 for ordinary (nonresident) and exempt companies.
For both types of companies registered shares may be issued partly paid.
Shareholders: One shareholder is required and no particular nationality or a qualification is necessary.
For an ordinary (non-resident) company, the names and addresses of shareholders have to be disclosed to the Registrar upon filing the annual return and the register is available for public inspection.
The Registrar is obliged to keep the information confidential.
Directors / Officers: The minimum number of directors is one.
The directors may be natural persons or bodies corporate.
The directors may be of any nationality, and need not be residents in the Cayman Islands.
Director’s information must be file at the Registrar.
However, the Registrar can only make this information available to the Registered Office, which can obtain it in the form of a Certificate of Incumbency.
Registered Office / Agent: It is necessary to have a local qualified Registered Office that also acts as Registered Agent.
Registers: Each company is required to keep the following registers, which are usually kept at the company’s registered office, although the register of mortgages and charges and the register of directors and officers are the only registers required by law to be kept by the registered office.
Register of Directors and Officers: This is required only to contain the names and addresses of the directors and officers, but normally also contain their dates of appointment and removal or resignation.
The reporting period by which a company is required to notify the Registrar of any changes to the register of directors and officers is 30 days.
Register of Members: This must contain the names and addresses of the shareholders of the company, the numbers of shares held by each, the distinguishing numbers (if any) of those shares, the amount paid or agreed to be paid on the shares, together with the date on which each person became and ceased to be a shareholder of the company.
The company register of members is required to confirm the number and category of shares held by each member and whether each category of shares carries voting rights under the articles of association.
Voting rights are defined as the right “to vote at general meetings of the entity on all or substantially all matters.”
Register of Mortgages: This must contain details of all mortgages and charges specifically affecting property of the company, including a short description of the property mortgaged or charged, the amount of the charge created, and the names of the mortgages or persons entitled to the charge.
Register of Beneficial Owners: All companies incorporated or registered by a way of continuation under the Cayman Companies Law (2016 Revision), including the ordinary resident and non-resident companies, special economic zones and exempted companies, must complete and maintain a beneficial owner register at the Cayman Island’s registered office.
The information is not public and it is accessible only upon request of the Cayman Islands competent authority.
Books, Records and Seal: A registers containing the record names and addresses of its directors and officers, and an extra copy of such register to send to the Registrar.
Every company is responsible to keep proper books of account with respect to all sums of money expended by the company and the matters in respect of which the receipt and expenditure take place; and, all assets and liabilities of the company.
A company may have a seal in the Registered Office and a duplicate seal for use overseas.
Economic Substance: The Cayman Islands introduced the Economic Substance laws through the Tax Co-operation (Economic Substance) Law (2020 Revision) (“the ES Law”), effective January 1, 2019.
Companies incorporated on or after this date must comply with the Act immediately and submit a report to the Tax Information Authority (“TIA”) demonstrating compliance with the ES Test within 12 months of the financial year-end.
This is in response to the European Union (“EU”) and the Organization for Economic Cooperation and Developments’ (“OECD”) various efforts to enhance tax transparency.
An ordinary (non-resident) company must file an annual return containing details of its shareholders, while an exempt company only needs to file an annual declaration of compliance with the company’s law signed by an officer or director.
Annual accounts do not have to be filed, nor do they require the appointment of auditors.
An ordinary (non-resident) company must hold at least one Annual General Meeting of Shareholders, which can be held anywhere in the world.
Alternates or Proxies usually accomplish this requirement.
Taxation & Fees
The annual fee to be tendered along with the annual return filing is US$945.46 for exempt companies with a capital of no more than $50,000.
Disclosure of Information
The Registrar of companies is required to disclose information relating to a company, to other regulatory authorities under certain laws.
Such regulatory bodies are the Anti-Corruption Commission, the Cayman Islands Monetary Authority, the Financial Crimes Unit of the Royal Cayman Islands Police Service, the Financial Reporting Authority, the Tax Information Authority, and certain other ‘competent authorities.
The Registrar will need to provide the information within 48 hours of receipt of the request from any such body.
Annual License Due Date and Penalties
|ANNUAL LICENSE||33.33%||66.67%||100%||STRUCK-OFF FROM THE|
|31 MARCH||1 APRIL – 30 JUNE||1 JULY – 30 SEPT||1 OCT. – 31 DEC||1 JANUARY|
Information contained in this publication does not constitute any kind of advice on any particular matters and should not be considered as such.
OMC Group accepts no responsibility for clients’ decisions. LR_MR_0421
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