Cayman Islands: Cayman Companies Law: Incorporations/Registrations And Generally Utilising A Cayman Islands Company Is Now Even Easier!

A resident company is for the most part a company carrying on business within the Cayman Islands. A company which wishes to trade within the Cayman Islands, e.g., in retail trading, real estate, hotel or restaurant operation, maintenance services or local shipping, must obtain a licence under the Trade and Business Licensing Law. If 60% of the equity is not Caymanian owned, then the Trade and Business Licensing Board will have to be convinced that there is a need for the company's services. A resident company must maintain at their registered office, open for public inspection, a register of their past and present members. A resident company must also file an annual report with Registry showing the names and addresses of all its members.

An exempted company is a company whose proposed activities are carried out mainly outside of the Cayman Islands. It is not a requirement for an exempted company to use Limited or Ltd in its name. An exempted company may express its capital in any currency or in multiple currencies. Within the exempted type, the following are also offered:

• Transfers by Continuation – a company with limited liability and share capital can become a Cayman Islands exempted company, provided it is incorporated in a foreign jurisdiction whose laws permit or do not prohibit the relocation of the company
• Exempted Limited Duration Company – a company that offers the possibility in certain jurisdictions of advantageous treatment as a partnership. Duration must be for a period of 30 years or less and, the company has at least two subscribers or two members. The name of the company includes at its end "Limited Duration Company" or "LDC";
• Segregated Portfolio Company– a company which allows for segregation of assets and liabilities between segregated portfolios (cells) established within an 'umbrella' company.

An ordinary non-resident company is an alternative to the exempted company. The company may deal in shares of foreign corporations, exempted companies and partnerships, but may only carry on such other business in the Cayman Islands as is necessary to further its foreign business. They are also similar to a resident company in that they must maintain at their registered office, open for public inspection, a register of their past and present members and, must also file an annual report with Registry showing the names and addresses of all its members, directors and the amount of paid-up capital. An application for non-resident status should be addressed to the Minister of Finance through the Registrar of Companies and must state that the company is not a company which does, or intends to carry on business within the Cayman Islands. An ordinary non-resident company may be re-registered as an exempted company.

A foreign company is a company which has been incorporated outside of the Cayman Islands and then registers as a foreign company in the Cayman Islands. A foreign company intending to do business from within the Cayman Islands must register as a foreign company in the Cayman Islands and this enables the registered foreign company to hold land or carry on business in the Cayman Islands or act as the general partner of a Cayman Islands Exempted Limited Partnership.

The shareholder approval process for mergers and consolidations was previously open to interpretation leading to a level of uncertainty. This has been clarified by providing that, except in the case of intra-group mergers, a merger or consolidation needs to be approved by a special resolution of the shareholders of each constituent company. A special resolution is a two third majority of the voting shareholders present in person or by proxy at a shareholders meeting or a unanimous written resolution of all voting shareholders.

A further amendment allows the surviving company or the consolidated company in a merger to be a foreign company. Previously, the surviving company or consolidated company had to be a Cayman company which limited the scope of transactions for which the merger and consolidation provisions could be used.

The definition of 'Special Resolution' has been amended so that the articles of association of a company may provide that different items of business which must be approved by Special Resolution may have different voting thresholds. This is subject to the overriding requirement that the minimum voting threshold is always two thirds of those present in person or by proxy at a shareholders meeting. Previously, the better view was that the same voting threshold, whether two thirds or greater than two thirds, had to apply to all items of business. The new definition will give greater flexibility to companies that wish to have differing voting thresholds for different decisions.

It is permissible for an exempted company to have two names i.e. a name in English and a name in a foreign script (e.g. Chinese, Japanese, Cyrillic or Arabic script). The foreign name may precede or follow the English name in the presentation of the company's name and need not be a translation or transliteration of the company's English name. An official English translation or transliteration of the foreign name must be provided. The company will not be registered if the translation or transliteration is the same as or deceptively similar to the name of another existing company registered in the Cayman Islands. Previously, the Registrar of Companies would, as a matter of practice, allow a foreign script to appear on the certificate of incorporation but the foreign script was not part of the company's name. Cayman's regulatory laws (i.e. laws which regulate banks, mutual funds, insurance companies and other regulated entities) will apply to the translated name of a company as if it were the name of the company. The fact that the two names do not need to be a direct translation of each other is a definite advantage and should prove attractive in the Chinese and Hong Kong markets.

Originally, each segregated portfolio of a segregated portfolio company was required to include the words "Segregated Portfolio" in full in its name. It is now permissible to use the abbreviation "SP" or "S.P."

Previously, directors of a segregated portfolio company could incur personal liability as a result of failing to identify which segregated portfolio the segregated portfolio company was contracting or transacting for. The Amendment Law removes such personal liability and provides for a practical procedure where such a failure does arise. The directors must make any necessary enquiries to determine to which segregated portfolio the contract or transaction should be attributed, make the correct attribution and notify in writing all relevant counterparties and others who may be adversely affected by the attribution and their rights. Any party notified, or any party who should have been notified, has the right to object to the court about the attribution and the court has the power to order the correct attribution between segregated portfolios and/or the general assets.

It is now permissible for assets to be transferred between a segregated portfolio and the general assets provided that the transfer is at full value. Previously, such a transfer was only possible between segregated portfolios.

An amendment has been made to make it clear that assets of a segregated portfolio are available to meet liabilities to holders of segregated portfolio shares in respect of that segregated portfolio in addition to the creditors of that segregated portfolio. In addition, provision has been made for holders of segregated portfolio shares to be prospective claimants in the winding up of a segregated portfolio company.

Specific provisions are now included for the termination of a redundant segregated portfolio which has no assets or liabilities and for the re-instatement of any segregated portfolio that has been terminated. Subject to any other authority required under the articles of a segregated portfolio company, a segregated portfolio may be terminated or re-instated by directors resolution.