Every Cayman hedge fund operator should have an exit strategy when developing a regulated Cayman fund product. While creating a checklist for launch, they should seek guidance on the requirements necessary to terminate the hedge fund once registered with the Cayman Islands Monetary Authority ("Authority").
Quite simply, there are fees and there is a process. Way too often, there is a lack of awareness of the scope of the process and level of costs associated. Applicable requirements will depend on whether the fund is a registered fund, an administered fund or a licensed fund.
Timing is important. The de-registration process may be commenced at anytime during the fund's life cycle. However, if the process is started but not complete by or before December 31st in any given year, then at least 50% of the applicable annual registration fees may be payable to the Authority. This goes on until the de registration process for the fund is complete.
It goes without saying that operators should be keeping their funds under constant review, and where any decision to cease trading as a fund is contemplated or made, the regulatory timetable should be factored in.
As a part of the de-registration process the fund may, in certain circumstances, also benefit from a partial year Audit waiver from the Authority.
It is important to note that de-registration alone does not mean the end of the life of the corporate entity. It is merely a regulatory step in the termination of a Cayman hedge fund.
For more information on Cayman Islands regulatory Law, please contact Simone Proctor.
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.