The Cayman Islands have a modern Companies Law which permits company incorporation by the registration system. There are three basic types of company capable of registration:

  • The ordinary company
  • The ordinary non-resident company
  • The exempted company

For an ordinary company to be designated non-resident, the Financial Secretary of the Cayman Islands must be satisfied that it does not, and does not intend to, carry on business within the islands. The Companies Law provides that exempted companies may not carry on business in the Cayman Islands except in furtherance of their business abroad. Neither ordinary non-resident companies nor exempted companies are subject to the licensing provisions and requirements of the Local Companies (Control) Law and hence they are the types of companies most often used in offshore operations.

Banks, trust companies, insurance companies and managers, mutual funds and administrators and company managers duly licensed are also exempted from the requirements of the Local Companies (Control) Law. Foreign companies may register branches to do business in the Cayman Islands. They may also transfer by way of continuation to the Cayman Islands and thus become exempted companies.


An ordinary company must have at least one shareholder of record and at least one director. An annual general meeting must be held once each year. The company may carry on business from the moment of issue of its certificate of incorporation. It may (but is no longer required to) have a common seal, has corporate legal personality and perpetual succession.


The provisions are the same as for ordinary companies except that the company must be designated a non-resident company by certificate issued by the Financial Secretary, provided that he is of the opinion that it does not, and does not intend to, carry on business within the islands. Ordinary non-resident companies may convert to exempted companies.


An exempted company is incorporated in the same way as an ordinary company. An exempted company must have at least one director and must hold a director's meeting in the Cayman Islands at least once each year. These can be held by proxy or alternate appointments. Otherwise the requirements are essentially the same as in the case of an ordinary company except for the exemptions and privileges listed below:

  • An exempted company does not have to file an annual return of its shareholders with the Registrar of Companies or the Immigration Board.
  • An exempted company's Register of Members is not open to inspection.
  • An exempted company does not have to hold an annual general meeting.
  • An exempted company may issue no par value negotiable or bearer shares.
  • An exempted company may obtain an undertaking against the imposition of any future taxation which is usually given for twenty years in the first instance and is renewable.
  • An exempted company may register by way of continuation in another jurisdiction and be de-registered in the Cayman Islands.
  • An exempted company may register as a limited duration company. A limited duration company must have two shareholders of record and has a maximum life of thirty years.

In January of each year an exempted company must file a declaration that it has complied with certain provisions of the Companies Law. An exempted company may not carry on business in the Cayman Islands except in furtherance of its business abroad, and may not make any invitation to the public in the Cayman Islands to subscribe for any of its shares or debentures and it may not own land in the Cayman Islands unless given specific permission by the Financial Secretary.


The usual corporate vehicle is the company limited by shares although the Companies Law also permits the incorporation of a company limited by guarantee (with or without share capital), an unlimited company or a hybrid company limited by shares or guarantee but with a class of shares or guarantee with unlimited liability.

Registration formalities consist of the filing with the Registrar of Companies of a Memorandum of Association which must contain the following information:

  • The name of the company;
  • The address of its registered office;
  • The objects of the company, which may now be unrestricted;
  • A declaration that the liability of the members is limited if the company is limited;
  • The amount of the authorised capital and the amount of each share (or where no par value shares are used, the number of shares) into which the capital is divided.

Incorporation will be completed upon subscription to the Memorandum of Association by one or more persons. The company may commence carrying on business from the date of incorporation as set out in the Certificate of Incorporation. Pre incorporation contracts may be ratified.

The name of the company must contain the word "Limited" or "Ltd." if the company is to be registered as an ordinary limited company, but need not if it is to be an exempted limited company. The name of any company may not resemble closely that of a company already registered nor contain certain words as "Royal" or "Imperial" or the words "Bank" or "Insurance" or derivatives unless appropriate licenses are obtained.

A company limited by shares may, and a company limited by guarantee and a unlimited company must, register with its Memorandum of Association the Articles of Association signed by the subscribers and prescribing regulations for the company. Where no Articles of Association are registered, Table "A" in the schedule to the Companies Law (Revised) comprises the regulations of the company. Where Articles of Association are not registered with the Memorandum of Association, they may be adopted at a later time.

Incorporation and registration usually takes a day, although in cases of extreme emergency this can be accelerated or, as an alternative, a shelf company can be purchased.


Unless the Memorandum of Association expressly restricts the company to the objects stated, it has the power to carry out any legal object. It also has the power to exercise all the functions of a natural person irrespective of corporate benefit. No act of or disposition to or by a company is invalid merely because the company had no relevant power or capacity, but this does not preclude injunctive relief prior to the act or disposition or a subsequent action against the relevant directors or officers for loss arising out of their unauthorised act.


The Companies Law does not specify any minimum issued or paid up share capital except that to complete the incorporation formalities the Memorandum of Association must be subscribed to by one or more persons. Each subscriber must agree to subscribe for one or more shares of any one denomination. Shares need not be fully paid up on issue, except that in the case of an exempted company issuing bearer shares, these shares must be fully paid on issue. Shares may be of any par value and the par value may be expressed in any one or more currencies. Any company limited by shares may, if authorised by its Articles of Association, issue fractional shares.

Payments for shares may be in cash or in kind or shares may be issued in consideration for services performed for the company. However, shares may be issued at a discount only if shares of the class to be issued have already been issued and the issue at a discount has been authorised by resolution of the company in general meeting and sanctioned by the court, the resolution specifies the maximum rate of discount, the company has been registered for at least one year and the shares are issued within one month of the court's sanction.

Share capital may be divided into such classes of shares including fractions of a share with such rights as to voting, participation in profits and return of capital as the company may be authorised to issue by its Articles of Association. Unless otherwise provided in the Articles of Association, a fraction of a share is subject to and carries the corresponding faction of liabilities, limitations, preferences, privileges, qualifications, restrictions, rights of other attributes of a whole share of the same class of shares. The nominal or par value of a share can be expressed in an amount which is a fraction or a percentage of the lowest available unit of the currency in which the share capital of the company is expressed.

Dividends and distributions may be paid out of the share premium account subject to the company being solvent.

A company may redeem or purchase its own shares. Payment of the redemption or purchase price may be made out of the proceeds of a fresh issue of shares, profits, share premium account, capital redemption reserve or, subject to the company being solvent, out of share capital.

An ordinary company may only have registered shares. An exempted company may have either registered or bearer shares or a combination of both.

If permitted by its Articles of Association, a company limited by shares may increase its authorised share capital beyond the registered share capital upon the payment of a fee to the Registrar of Companies. Such an increase is usually permitted by the Articles of Association and must be authorised by the passing of an ordinary resolution.

A reduction of share capital must be permitted by the Articles of Association and must be authorised by the passing of a special resolution. The reduction itself must then be confirmed by an order of the Grand Court of the Cayman Islands upon petition.

A special resolution is defined as a resolution passed by two thirds of the members entitled to vote as may be present at the meeting at which the resolution is proposed. Notice of the intention to propose such a resolution must be specified in the notice of the meeting. Special resolutions may also be passed by unanimous written resolution of the shareholders if the Articles of Association so permit.

Reorganisation of the share capital of a company can be carried out by ordinary resolution of the shareholders in general meeting provided that it is authorised by the company's Articles of Association. Statutory provisions exist based upon English law to facilitate reconstructions, amalgamations and mergers with both Cayman Islands and foreign companies.


A company need have only one shareholder unless it is a limited duration company where at least two shareholders are required. In any case only one beneficial owner is required. The Companies Law does not place any restriction on the nationality or place of residence of the shareholders of the company.

An ordinary company must maintain a register of its members which is kept at the registered office of the company and is open to inspection by any person. An ordinary company must also file a list of its shareholders and their shareholdings with the Registrar of Companies in January of each year. An ordinary company must also file a similar list with the Immigration Board indicating the shares beneficially owned by Caymanians. An exempted company must maintain a register of its members but this may be held outside the Cayman Islands and is not open to inspection by third parties.

The provisions relating to meetings of a company are usually contained in the Articles of Association. Table A of the Companies Law provides that a general meeting of the shareholders of a company will be held once in every calendar year at such place and time as the directors may appoint. This general meeting is known as the Annual General Meeting. Table A also provides that any other general meeting will be known as an Extraordinary General Meeting. All business transacted at an extraordinary general meeting and all business transacted at the Annual General Meeting except strict routine business is know as special business and must be specified in the notice of the meeting.

The Law contains no provisions relating to the procedures to be followed at a general meeting but again Table A provides that the Chairman of the Board of Directors will be the Chairman of the meeting and that the Chairman will have a casting vote.

It is normal to provide in the Articles of Association that attendance at meetings may be by proxy and that the proxy need not be a member of the company.

The Companies Law provides that minutes of all resolutions and proceedings of General Meetings of the company will be kept in writing but there is no provision setting out where the minute book is to be kept. In practice, it is normally kept at the Company's registered office.


There is no requirement that any of the directors of a company be resident in the Cayman Islands. A company must maintain a register of directors and officers and notify the Registrar of Companies of its contents. This provision applies both to ordinary and exempted companies. The directors of an exempted company must hold a directors' meeting in the Cayman Islands at least once per year although this can be held by proxy or alternate appointments.

Provisions relating to the number of directors, shareholding qualifications, period of office, meetings and powers are usually contained in the Articles of Association.

The provisions relating to meetings are normally very wide and the directors may regulate their meetings as they think fit. The proceedings at such meetings must be minuted and the minutes maintained with the company's corporate records. It is possible for meetings to be held by conference telephone and a resolution signed by all or a specified number of the directors to be effective as if such resolution were passed at a duly convened meeting of the directors. For convenience, alternate directors may be appointed or the Articles of Association may provide that a director may appoint a proxy to attend and vote at the meeting in his stead.

Directors are under a duty to act in good faith and in the best interests of the company in question. In certain circumstances, these obligations can extend to creditors of the company. Personal liability can result from failure to meet the required standards.


The Companies Law requires that every company keep such proper books of account as are necessary to give a true and fair view of the state of the company's affairs and to explain its transactions. There is no statutory requirement that the accounts of a company be audited nor is there any requirement for the filing of annual accounts with any government organisation. It is normal to provide in the Articles of Association that the company may appoint auditors and have its accounts audited.

Where a company is in possession of a bank or trust license under the Banks & Trust Companies Law or an insurance license under the Insurance Law or a companies management license under the Companies Management Law, or a mutual fund administrators license or is a regulated mutual fund under the Mutual Funds Law, then such company must have its accounts audited annually and must file a set of its audited financial statements each year with the Inspector of Financial Services. The time period for filing such financial statements varies between three and six months of the company's year end depending on the type of license held.


An ordinary company must maintain a Register of Members, a register of mortgages and charges and a register of its directors and officers and each register must be kept at its registered office. The Register of Members must be kept available for public inspection. The Register of Mortgages must be kept available for inspection by creditors and members and a copy of the Register of Directors and Officers must be filed with the Registrar of Companies and updated within thirty days of any change. The latter two provisions apply also to an exempted company.

An ordinary company must file a list of shareholders and their shareholdings in January of each and a similar return must be filed by an ordinary resident company with the Immigration Board under the Local Companies (Control Law) with the addition of a statement as to which shares are beneficially owned by persons of Caymanian Status.

An exempted company merely files a declaration that the operations of the company have, in the previous year, being carried out in compliance with certain provisions of the Companies Law.


Every company must maintain a registered office in the Cayman Islands, and upon any change of location the Registrar of Companies must be notified. The change in location may be effected by resolution of the Directors.

A company will normally keep its common seal at its registered office.


The winding-up or liquidation of a company is also controlled by the Companies Law. Liquidations may be of two types; voluntary by resolution of the shareholders or compulsory by order of the court. A third alternative is the striking off of defunct companies by the Registrar of Companies.


A company may be wound-up voluntarily when the period fixed for the duration of the company by its Articles of Association expires, or upon the occurrence of an event specified in the Articles of Association as being the time when dissolution will take place and when an ordinary resolution to that effect has been passed. A voluntary winding-up may also commence automatically upon the triggering event and without the need for an ordinary resolution. Further, a voluntary winding-up will take place upon the passing of a special resolution of the shareholders or if the company cannot continue its business by reason of its liabilities upon the passing of an ordinary resolution of the shareholders.

Once the winding-up has commenced, the company must cease to carry on its business except as necessary for the winding-up. The liquidation is carried out by one or more liquidators appointed by the company in general meeting or, in the case of an automatic winding-up, appointed by the Articles of Association and upon such appointment the directors powers normally cease.

The commencement of the winding-up requires to be gazetted. Upon the completion of the winding-up the liquidator will call a general meeting at which a liquidation accounts will be presented to the shareholders. A notice relating to this meeting must be published in the Cayman Islands Gazette at least one month before the meeting. The liquidator will make a return of the meeting to the Registrar of Companies and three months after the registration of such return, the company will be deemed to be dissolved.

Where a creditor believes that his rights are prejudiced by a voluntary winding-up he may petition the Grand Court of the Cayman Islands and if the courts see fit it may order that such winding-up continue under its supervision.


A company may be wound-up by the court in certain circumstances. The most common of which are that the company is unable to pay its debts or that the court is of the opinion that it is just an equitable that the company should be wound-up. Winding-up is commenced by petition presented by the company, by a contributory or by a creditor and the company is deemed to be in liquidation from the time of the presentation of the petition. The company will be dissolved from a date of an order of the Grand Court to that effect and this order will be made when the liquidator appointed by the court reports that the liquidation is complete.


Where the Registrar of Companies has reason to believe that a company is not in operation or is not carrying on business, he may strike the company off the register and the company will thereupon be dissolved. However, a creditor or any member aggrieved by the striking off may apply to the courts to have the company reinstated. A fee equal to the relevant incorporation fee for the company is payable upon reinstatement plus all unpaid annual fees. If such a company has assets at the time of striking off, those assets vest in the Government of the Cayman Islands.


A Limited Duration Company "LDC" is broadly similar to the limited liability company in the United States. The LDC combines the benefit of limited liability and the convenience of administration of a corporate entity with the possibility of a transparency or flow-through for tax and other purposes in foreign jurisdiction such as treatment as a partnership for United Federal Income Tax purposes. The overall regime of the Companies Law regulating exempted companies applies to LDCs with certain additions and exceptions which are summarised below. A new or an existing exempted company or an ordinary non-resident company re-registering as exempted or a foreign company registering by way of continuation or an exempted company limited by guarantee may register as an LDC.

The provisions described below create a flexible regime allowing the LDC to be structured to meet the particular requirements of its members (shareholders). In substance, they impose (or permit) requirements particularly seen in limited partnerships:

  • The LDC must include at the end of its name "Limited Duration Company" or "LDC".
  • It must at all times (like a partnership) have two members (shareholders).
  • Its Memorandum of Association must limit the duration of the LDC to thirty years or less
  • The Articles of Association may provide that transfers of shares or other membership interest are prohibited or that transfers require the unanimous approval of all the other members (shareholders) and that the management of the LDC is vested in the members, or proportionally according to their shares or interest or in such other manner as the Articles of Association of the LDC may specify. In substance, this means that the members shareholders) are the directors of the LDC. In such a case the Articles of Association may, nevertheless, also permit the delegation of the management to a Board of Directors.

The voluntary liquidation (winding-up) and dissolution provisions of the LDC provide for its commencement automatically on the triggering of certain events as described in the law. These provisions are also typically seen in limited partnerships.

An LDC may cease to be an LDC by deleting from its name the word "Limited Duration Company" or "LDC" or changing its Memorandum of Association so that its duration exceeds or may exceed thirty years.


The Companies Law permits the use of the basic exempted company as an alternative to the LDC, in circumstances where a company with a fixed life is required, but where the maximum thirty year duration of the LDC is unattractive. This additional vehicle may best be called a "Limited Life Company" or "LLC".

Certain provisions applicable to the LDC do not apply to the LLC, in particular:

  • An LLC may not use in its name the words Limited Duration Company or LDC. It may use the term LLC or any other term permitted for an exempted company which is not an LDC.
  • There is no statutory requirement that an LLC have two members (shareholders).
  • There is no statutory requirement that an LLC limit its duration to thirty years.

The four following partnership indicia (required for tax transparency or pass-through) may be included by an LLC in its Articles of Association.

  • The prohibition or restriction on the free transferability of its shares.
  • The issue of one or more classes of shares carrying limited or unlimited liability.
  • The reservation of management and control to the members (shareholders).
  • The mandatory commencement of winding-up and dissolution of the LLC on determination of any period or on the happening of any event. At that point the liquidator automatically and without further action takes up office and is the person designated by resolution of the members passed prior to the commencement of the winding-up.

As a result of these provisions applicable generally to exempted companies, the LLC may be a useful and attractive alternative to the LDC where the thirty year duration limitation of the LDC is commercially inconvenient.


Many Cayman Islands companies are established to meet legally the objective of minimising, deferring or avoiding taxation in other jurisdictions. Comprehensive advice on such matters is not, however, generally available in the Cayman Islands and competent international tax planning advice should always be sought in the jurisdiction in which the owner, whether a company or an individual, is doing business and is resident for tax purposes. KPMG do, however, have a Tax Department which is able to advise on all aspects of United States tax matters.

Some of the more common uses of Cayman Islands companies include:

  • Offshore banking and trust companies (Chapter 5)
  • Offshore insurance and reinsurance companies (Chapter 6)
  • Offshore investment companies, investment holding companies and mutual funds (Chapter 7)
  • International trading, leasing or servicing companies.
  • Companies generating international royalties and commissions.
  • Special purpose vehicles.

This information provides an introduction to aspects of establishing business in the Cayman Islands for the benefit of clients who may be considering using the Islands as an offshore domicile. It is not exhaustive and is merely intended to give a broad indication of possible courses of action.

Before taking action on any business or other decisions related to the Cayman Islands, specific and particular advice should be sought from domestic taxation, legal, accountancy and other relevant professional advisers.

The information provided reflects the laws and regulations existing at December 31, 1996, but later developments have been noted where possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.