If you've decided that a section 4(3) Cayman fund is the best structure for your fund ( see our earlier blog for an Introduction to Cayman Fund Products), you'll need to register it with the Cayman Islands Monetary Authority (CIMA) before you launch. The process is well established and fairly straightforward, involving your Cayman lawyers filing the following with CIMA via their online registration system.
- Offering document
This is the main document which sets out details of the interests in the fund that are being offered to investors, also referred to as the private placement memorandum or offering memorandum. Under the Mutual Funds Law this document must describe the equity interests (shares, partnership interests or trust units, depending on type of fund vehicle you're using) in the fund in all material respects. It must also contain such other information as is necessary to enable a prospective investor to make an informed decision whether to buy interests in the fund.
Although not required by law, CIMA will expect the offering document to include details of the fund's investment objectives and strategies and any restrictions, subscription and redemption policy and procedures, names and biographical details of the directors, net asset valuation policy calculation, risk factors, details of the investment manager and all main service providers including their fees, conflicts of interest, a statement confirming the fund's regulation under section 4(3), anti-money laundering procedures and dividend / distribution policy. Remember that for a 4(3) fund the minimum initial investment level is US$100,000 for each investor, or the equivalent in another currency, or the equity interests must be listed on a stock exchange recognised by CIMA.
- Registration form MF1
This is a standard CIMA form which requires summary details of the fund, its equity interests, investment policy, directors and service providers. A certified copy of the fund's certificate of incorporation / registration with the Cayman Registrar of Companies and a CIMA Connect affidavit signed by a director of the fund authorising the fund's Cayman lawyers to file the registration documents must also be included with the form.
- Registration fee
The registration fee payable to CIMA to register a section 4(3) fund is currently US$4, 268, plus a fee of US$365 for filing the Form MF1.
- Auditor's consent letter
The fund's auditor will be familiar with the form of this letter, which confirms that they accept their appointment as auditors of the fund, they will comply with the Mutual Funds Law obligations for auditors, the date of the financial statements of the fund and the accounting principles adopted. The auditor must be on a list of approved local auditors published by CIMA, which includes the Cayman branches of the international accountancy firms, as well as various Cayman auditors.
- Administrator's consent letter
This letter includes a summary of the services the administrator will provide to the fund and confirms that the administrator accepts their appointment as administrator of the fund and that they will maintain records for the fund in compliance with the anti-money laundering laws and regulations of the Cayman Islands or of another approved jurisdiction (so called Schedule 3 jurisdictions, please contact us for the current list of jurisdictions). The fund's administrator will also be familiar with the form of this letter.
A section 4(3) fund established as a company will also need to make sure that its directors are registered or licensed with CIMA under the Directors Registration and Licensing Law (DRLL). Non-compliance with this law is a criminal offence for the director and CIMA will not register a fund whose directors are not appropriately registered or licensed with them. Our earlier blog goes into more detail about registration under the DRLL.
Once the fund has filed its documents with CIMA, CIMA estimates that approval can be expected to come through within one week, although in practice it can take 4-6 weeks.
There are slightly different registration requirements for registering master funds with CIMA, involving filing a Form MF4 setting out certain prescribed details, the master fund's offering document (if it has one) and a copy of the master fund's certificate of incorporation / registration, and paying the registration fee of US$3,048 plus a fee of US$365 for filing the Form MF4.
Between the Cayman funds lawyers here at Harneys we've many years' experience (more like decades...) of registering section 4(3) funds, so just let us know if you'd like any more information on what's involved or any other advice on your launch.
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.