Bell Rock Group is a leading provider of Cayman Islands Fund and Corporate Services including the provision of highly experienced directors and governance professionals. We act on the board of many of the leading names in the asset management industry, provide complete solutions for launching investment funds such as hedge funds, venture capital, private equity, real estate, infrastructure funds and also at the forefront of digital asset and blockchain investment funds solutions. In order to form and register an LLC, a registration statement must be submitted by the corporate services provider to the Registrar of Limited Liability Companies in the Cayman Islands which sets out basic information regarding the limited liability company and the appropriate filing fees. A Certificate of Registration issued by the Registrar of Limited Liability Companies is conclusive evidence that the requirements of the LLC Act have been complied with in respect of the formation and registration of an LLC.

Hedge Funds: Streamlining Operations and Ensuring Compliance with Outsourced Administration

No separate minimum ratio is prescribed for Cayman Islands branches of banks regulated in another jurisdiction, but such banks are required to comply with the ratio prescribed by the regulators in their hycm review home jurisdictions. The extent of these corporate governance obligations may come as a surprise to operators who did not appreciate these obligations apply at the fund level rather than to the investment manager. Whilst many investment managers will likely have certain aspects in place due to their own regulatory obligations, these need to be carefully considered and applied to the fund, with any gaps being addressed.

Licensing policy restrictions and requirements

Payment for repurchased and redeemed shares – subject to satisfying the Solvency Test, Shares may be repurchased or redeemed out of share capital, out of profits, out of the share premium account or out of the proceeds of a fresh issue of  shares made for the purposes of the repurchase or redemption. A shareholder who receives a payment in respect of an unlawful repurchase or redemption of Shares is not generally liable to return payment unless it knew that the repurchase or redemption was unlawful. However, this is a complicated area of the law and so specific legal advice should be sought in cases where a repurchase or redemption may have been effected unlawfully. The management and operation of an ELP will typically be set out in its exempted limited partnership agreement entered into between its general partner and limited partner(s). An ELP must have at least one general partner who is responsible for the management and operation of the ELP. A company limited by guarantee is a Cayman company (whether exempt or ordinary) that instead of having shareholders has members.

Under the AMLRs, RPs are expected to train their employees and also take appropriate measures from time to time to make employees aware of their AML/CFT procedures and the enactments relating to money laundering, terrorist financing, proliferation financing and targeted financial sanctions. RPs are expected under the AMLRs to obtain all relevant information or data from reliable, independent source documents, data, or information to evidence that they have identified and verified the beneficial owners and other authorised persons who have effective control over the customer. In 2020 and 2022, the Authority published its first supervisory circular and second supervisory circular setting out the findings from Inspections conducted for the RPs in 2020 and 2021, and the controls required to be undertaken by the RPs to address the identified deficiencies. This publication is not intended to be a substitute for specific legal advice or a legal opinion. It would be a matter of the tax laws of the home jurisdiction, but a Cayman Islands branch of a foreign bank may fall outside the scope of the Economic Substance Act if it is considered tax resident in the home jurisdiction. Licences are issued to institutions on the basis that it is acceptable for them to carry on the type of business specified in the licence application.

Any change in the scope or type of activity undertaken will require an amendment to the licensee’s business plan and may necessitate a review of the status of the licence. Therefore, institutions should discuss matters with their legal counsel before embarking on any major shift in policy relating to their Cayman Islands operations. A copy of the audited accounts must be filed with CIMA within three months of the end of the licensee’s financial year. “Banking business” is defined by the Banks and Trust Companies Act (Revised) (BTC Act) as the “business of receiving (other than from a bank or trust company) and holding on current, savings, deposit or other similar account money which is repayable by cheque or order and may be invested by way of advances to customers or otherwise”. Investors who are not financially literate are more at risk of fraud and illegal investment opportunities.

We advise on the laws of the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and Luxembourg and provide specialist entity management, governance, regulatory and consulting services. The members of the governing body of a fund must hold regular meetings, at least annually and, depending on the size, nature, and complexity of the fund, more frequently. A detailed agenda for each meeting should be circulated sufficiently in advance of any meeting of the members of the governing body to allow each member of the governing body to apprise him or herself of the matters to be discussed. The minutes should include the items that require periodic review, such as reports from outsourced service providers such as the investment manager and the administrator.

If used in a private wealth context foundation companies are often incorporated as companies limited by guarantee, which avoids the need for probate to be obtained where shares are issued and one or more shareholders die. Harneys can assist in reviewing all existing fund policies and procedures, the fund’s offering documents and constitutional documents and, if necessary, preparing a compliance manual that addresses the requirements for policies and procedures in the corporate governance and internal controls requirements. In addition, we anticipate that most funds will need to make some changes to their offering documentation or make some up to date investor disclosure about the requirements of the rules and statements of guidance.

• As usual, this assessment should be documented as required by applicable CIMA guidance.We expect that some existing AML policies and procedures may already meet the new requirements.
• We also manage the issue and redemption of the Cayman Islands currency and provide assistance to overseas regulatory authorities, including the execution of memoranda of understanding to assist with consolidated supervision.
• Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients.
• The Labour Act (As Revised) (the “Labour Act” ) of the Cayman Islands establishes minimum employment standards but does not preclude an employer from setting terms and conditions which are above the minimum.
• Appointment of our Cayman-based fiduciaries, who operate separately from Conyers law firm, to the boards of corporate funds, general partners or independent governance committees will assist fund managers with their response to ensuring appropriate levels of independence and sound governance at the investment fund level.

“The global minimum tax under Pillar Two establishes a floor on corporate tax competition which will ensure a multinational enterprise (MNE) is subject to tax in each jurisdiction at a 15% effective minimum tax rate regardless of where it operates, thereby ensuring a level playing field. This global minimum tax framework under Pillar Two is already a reality, with over 50 jurisdictions taking steps towards implementation”. Every ordinary company, whether local or non-resident, must hold an Annual General Meeting of shareholders. Within 21 days after the Annual General Meeting, the company must file an annual return listing the names and addresses and shares held by all members of the company on the 14th day after the Annual General Meeting, and those who have ceased to be members of the company since the last list was made. The annual return must be filed with the Registrar in January of each year, together with the appropriate annual fee which varies (depending on whether the company is classed as “resident” or “non-resident” and on the authorised share capital). In common with other financial centres in the world, the Cayman Islands has enacted legislation that is aligned with international principles in preventing and detecting money laundering (AML) and combating terrorist and proliferation financing (CFT and CPF respectively) and breaches of applicable sanctions regimes.

Established on 1 January 1997, the Cayman Islands Monetary Authority (CIMA) is the primary regulator responsible for the regulation and supervision of financial services entities operating in and from the Cayman Islands. We also manage the issue and redemption of the Cayman Islands currency and provide assistance to overseas regulatory authorities, including the execution of memoranda of understanding to assist with consolidated supervision. The Cayman Islands Monetary Authority (CIMA) conducts inspections to ensure that regulated entities comply with applicable laws and regulations. A regulated entities risk assessment should be a process of identifying potential risks to the entity’s objectives, operations, processes, and procedure. Once identified management should determine how these risks are to be mitigated by the entity’s control environment, this process should be continuous and constantly evaluated. CIMA further acknowledges the internal control needs will differ depending on the size and nature of the entities.

A separate statement of guidance was published by CIMA providing guidance specifically registered mutual funds and private funds, as well as on internal controls for regulated entities. Any managers who have related entities should also review those publications as they provide specific details regarding industry-related requirements and operational functions. The statement of guidance is not meant to be exhaustive like the ruling, but minimum requirements the entities should follow.

RPs should closely consider the findings in this Circular and ensure shakepay review that their AML/CFT policies, procedures, systems, and controls are always of the appropriate standard, noting that they may be subject to an Inspection by the Authority. The new Corporate Governance Rule and Internal Controls Rule create binding obligations on regulated entities, a breach of which may lead to the imposition of fines or other regulatory action. A liquidator of a British Virgin Islands (“BVI”) company which is in insolvent liquidation can make various applications against current directors or former directors of the company. The BVI Business Companies (Amendment) Act 2024 (Amendment Act) introduced a number of changes affecting shareholders and beneficial owners as part of the BVI’s effort to maintain its strong reputation for transparency and international best practice and enhance its ability to combat the use of financial services for…

Type of company

• An LLP is not a body corporate and, in this respect, differs from a UK LLP which structurally is more akin to a corporate rather than partnership vehicle.
• The Cayman Islands has several types of corporate vehicles or legal structures available for conducting business in or outside of the Cayman Islands.
• The two new regulatory measures are not yet in effect and will take effect 6 months from publication on 14 April 2023; ie, on 14 October 2023.
• Creditors and contributories of the company can also apply to the Court for a supervision order if the company is or is likely to become insolvent, or the Court’s supervision will facilitate a more effective, economic or expeditious liquidation in the interests of the creditors and contributories.

The Authority has noted an improvement in compliance by RPs since the prior period’s results. However, there is still room for improvement in the effectiveness of the policies and procedures, particularly around CDD, ongoing monitoring and maintenance of an appropriate effective independent audit function. RPs are required under the AMLRs to ensure that all their records are maintained in line with the regulatory requirements and can be made available to the Authority on request, and to the FRA or law enforcement authorities, in accordance with the relevant provisions. Under the AMLRs, RPs are required to put in place adequate internal reporting procedures in line with the Cayman Islands regulatory framework including the designation of an independent MLRO/DMLRO.

CIMA has a regulatory policy specifying to the criteria for approving changes in ownership and control. Approval from the Cayman Islands authorities may be required if foreign investors are investing in a Cayman Islands company that conducts local business (ie, with businesses and individuals located in the Cayman Islands) (a “Local Company”). This is necessary where it is contemplated that a foreign investor will hold greater than 40% voting or economic interest in a Local Company. The Local Companies (Control) Act (As Revised) of the Cayman Islands (“LCCA”) has protective provisions therein that provide that a Local Company must have 60% Caymanian shareholders and directors, who maintain 60% of the economic and voting control of the company. Before a company can carry out a bonus issue, the Articles should be checked to ensure that the directors have authority to capitalise the relevant profits or reserves and issue bonus shares.

Dividends are therefore usually paid pursuant to a resolution of the board of directors passed either by way of written resolution or at a board meeting. As a general rule, companies are bound by maintenance of capital rules and can only return value to their shareholders in certain situations. If an entity incorporated/formed in a jurisdiction other than the Cayman Islands intends to carry on business in or from within the Cayman Islands, it will need to register in the Cayman Islands. Such a structure would usually take the form of a unit trust under which the investors (the unitholders) contribute assets to the trustee to be managed and invested in accordance with the terms set out in the trust deed and any accompanying contractual documents. While combatting proliferation financing was broadly a requirement under the previous AMLRs, the amendment makes clear the importance of managing proliferation financing risks and provides specific additional requirements when undertaking risk assessments, enhanced due diligence, training and maintaining records and reports. The Beneficial Ownership Transparency (Access Restriction) Regulations, 2024 (the “BOTA AR Regulations”) came into force on 9 December 2024.

New Rules for CIMA Regulated Entities in the Cayman Islands

Establishing a bank or placing assets in the Cayman Islands enables banks to have the best opportunity to maximise the potential of their assets and gives them access to international financial markets. The New BO Regime expands its scope to include all registered Cayman Islands entities, including limited partnerships. Overseas entities registered fxcm canada review as foreign companies or foreign limited partnerships, as well as Cayman Islands trusts, remain out of scope.

Key Compliance Areas

Typically, the liability of members of a company limited by guarantee is limited under its constitution to US$1.00. A Cayman company limited by guarantee has many of the same features as a Cayman company limited. It is a body corporate with a legal personality distinct from that of its members, directors and officers. Companies limited by guarantee are rarely incorporated for purely commercial purposes, rather they are more typically used for nonprofit club scenarios where there is no expectation of profits passing to the members. From 2022 to date, the Authority has continued its risk-based approach to AML/CFT supervision of the RPs to assess their compliance with their AML/CFT obligations and compliance with the applicable laws and regulations. This Circular (the “Circular”) sets out the findings by the Authority from Inspections conducted on RPs for the period 1 January 2022 to 31 March 2024.

The more investors understand their approach to investment, the better they can maintain financial wellness. The strategy describes the goal of the campaign and informs and drives actions to improve financial awareness among investors, both locally and abroad.