Cayman Islands Companies
(a) Location: The Cayman Islands consist of three small islands (Grand Cayman, Cayman Brae and Little Cayman) which are situated in the western Caribbean, approximately 550 miles south of Miami and 120 miles northwest of Jamaica.
The main island, Grand Cayman, is approximately 75 square miles. Cayman Brae and Little Cayman are 14 square miles and 12 square miles respectively.
The capital and main commercial centre is George Town on Grand Cayman.
(b) Political factors: The Cayman Islands are a British Overseas Territory. There is no strong desire for independence; however the Islands are largely self-governing. Laws are enacted by a Legislative Assembly, at present consisting of 15 elected members and three senior civil servants (the Chief Secretary, the Attorney General and the Financial Secretary) appointed by the Governor as official members. The Legislative Assembly is presided over by a Speaker appointed by the members of the Assembly; the Speaker need not be a member of the Assembly. Elections are held every four years. All resident British Overseas Territory citizens who also hold Caymanian status, and are aged 18 or over, are eligible to vote.
Day-to-day government is in the hands of the Cabinet which is at present made up of two official members and five elected members with the Governor as chairman (non-voting). The five elected members are designated as ministers and hold portfolios. The Governor is appointed by the British Crown on the advice of the Foreign and Commonwealth Office and is responsible (through the Chief Secretary) for internal security (the police), the prison system and the administration of justice (the appointment of judges and the senior law officers). External security, defence and foreign affairs are under the control of the British Government, although the Islands are now permitted to undertake limited international initiatives directly. In addition, the Governor has reserved powers to act unilaterally in emergency situations (subject to oversight from London).
Constitutional modernisation (not extending to independence) was undertaken in May 2009 with the adoption of a new constitution for the Cayman Islands.
The Judiciary consists of five judges and two magistrates and a part-time Court of Appeal of five judges, any three of whom comprise the Court. The Chief Justice heads the judiciary and administration of the courts. Modernisation of the courts is underway and may include the appointment of specialist commercial judges.
(c) Legal system: The law of the Cayman Islands is based on English common law, together with local statutes appropriate for both international and local business. The Government has an active agenda to enact legislation to enhance Cayman’s position as a leading international financial centre.
(d) Language: The total population of the Islands was estimated to be 52,830 at the end of 2009. Approximately 45% of the population is of mixed racial origin, the remainder being of European, African or Asian (few but increasing) descent. Over 95% of the population lives in Grand Cayman. There is no significant racial disharmony.
The official language is English, although there are an increasing number of people, mainly from nearby Caribbean islands and from South and Central America, who also speak Spanish.
(e) Currency: The unit of currency is the Cayman Islands dollar (CIS), which is divided into 100 cents. Parity is fixed at CIS 1.00 = US$1.20. The Cayman Islands dollar therefore floats against all other currencies not fixed to the US dollar.
(f) Foreign investment: The Government’s objective is to achieve a steady rate of growth in the two major industries, tourism and finance. The Government is receptive to ideas for creating employment and expanding the economic base of the Islands, and foreign investment is welcomed except in areas already well served by locally owned enterprises.
The Islands generally have full employment and a high cost of living which can be a major limiting factor in the establishment of new businesses, although work permits are normally obtainable for projects approved by the Government.
(g) Business climate: The development of the Cayman Islands as an international financial centre has led to a sophisticated business environment with a full range of services including banks, trust companies, lawyers, accountants, insurance managers, mutual fund managers and administrators, and all the expected support services.
The Islands use the imperial system of weights and measures.
CAYMAN ISLANDS OFFSHORE COMPANIES
All companies are governed by the Companies Law (the latest version of which is the 2010 Revision).
The Cayman Islands Companies Law was passed in 1960 and is based on the 1929 and 1948 English Companies Act, and has since been extensively amended. Six types of companies are recognised by the law:
(1) ordinary resident companies
(2) ordinary non-resident companies
(3) exempted companies
(4) foreign companies
(5) exempted limited duration companies
(6) segregated portfolio companies
All companies may be formed with or without limited liability and, in the former case, may be limited by shares or limited by guarantee. In most cases, companies are formed with limited liability and are limited by shares.
Ordinary companies (resident and non-resident)
These companies may either be designated “resident” and used for local purposes within the Islands, or “non-resident” and used principally for offshore purposes. The ordinary non-resident company is, therefore, an alternative to the more commonly used exempted company — see below.
Resident companies are used for local business purposes within the Islands, including owning real estate in the Islands and owning ships to be registered on the Cayman Islands Shipping Register.
An ordinary company which is non-resident may be re-registered as an exempted company if:
(1) the company passes a special resolution that it be so re-registered, and
(2) an application for re-registration is delivered to the Registrar of Companies
together with the necessary documents prescribed by the law and the necessary fees. The documents are the memorandum and articles of association of the Cayman Offshore Company altered to conform with the requirements of the law for an exempted company, a fee equal to the fee payable on the registration of an exempted company and a declaration signed by a director that the operation of the company will be conducted outside the Cayman Islands.
If the Registrar of Companies is satisfied that the ordinary non-resident company has met the requirements of the law, a certificate of re-registration is issued stating that the company is an exempted company.
The re-registration of an ordinary non-resident company as an exempted company does not:
(1) create a new legal entity
(2) prejudice or affect the identity or continuity of the company
(3) affect the property of the company
(4) affect any appointment made, resolution passed or any other act or thing done in relation to the company pursuant to a power conferred by the memorandum and the articles of association of the company or the laws of the Cayman Islands
(5) affect the rights, powers, authorities, functions and liabilities or obligations of the company or any other person, or
(6) render defective any legal proceedings by or against the company. Any legal proceedings that could have been continued or commenced by or against the company before its re-registration may, notwithstanding the re-registration, be continued or commenced by or against the company after re-registration.
The Companies Law makes specific provisions for companies whose business is to be carried out mainly outside the Islands. Such companies, called exempted companies, are the normal preferred corporate body used for offshore businesses (including for investment fund purposes and efficient tax planning purposes).
The advantages afforded to exempted companies by the law include:
(1) a tax-free guarantee may be granted for a period of up to 30 years — a 20-year guarantee is normally granted, which may be extended to 30 years
(2) names and addresses of shareholders (except for the first subscribers to the memorandum and articles of association) are not made public or filed with the Registrar of Companies. However, full disclosure must be made to the registered office service provider and the board of directors, with due diligence being carried out on each shareholder
(3) the annual reporting requirements consist of a statement signed by a director or the company secretary that the operations of the company have been carried on mainly outside the Cayman Islands and that no changes to the memorandum and articles have been made unless already notified to the Registrar of Companies
(4) bearer shares may be issued if authorised by the memorandum and articles of association, but they must normally be immobilised and held by an authorised custodian such as a licensed trust company
(5) the name of an exempted company may be in a foreign language and need not include the word “Limited” or the abbreviation “Ltd”, which is mandatory for ordinary companies
(6) no annual meeting of the shareholders or directors is required.
Before the incorporation of any Cayman Islands company for a client is completed, it is necessary for the organisation incorporating the company to conduct thorough due diligence in respect of the client. This includes obtaining certain documentation which typically includes:
(1) a copy of the individual client’s photo page of his or her passport certified by a Notary Public or a Certificate of Incorporation or the equivalent constitutional document for a corporate client certified by a Notary Public
(2) proof of a client’s place of residence
(3) proof of the source of funds being used in the transaction
(4) two references (one character and one professional) in relation to the client and similar references in relation to any persons with whom the client intends carrying on business, and
(5) where the company is to be regulated in the Cayman Islands, a business plan setting out details of the proposed business of the company.
Ordinary resident, ordinary non-resident and exempted companies are all formed and registered in fundamentally the same manner. There are certain extra requirements for the formation of non-resident and exempted companies but also certain exemptions. The principal documents of incorporation are the memorandum of association and articles of association.
Incorporation is accomplished by filing the memorandum of association and articles of association, related documents and the required fees with the Registrar of Companies. The process takes between three and five days. However, there is an express incorporation service which can be used to achieve incorporation on the same day an application is made. On registration the Registrar issues a certificate of incorporation.
Capital structure: There are no debt/equity or thin capitalisation rules.
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