The Limited Liability Companies Bill, 2015 (LLC Bill) was approved by the Legislative Assembly of the Cayman Islands on 6 May 2016. Once enacted, it will allow the formation and registration of limited liability companies (LLCs) in the jurisdiction.
The LLC Bill, which introduces a Cayman Islands LLC as a new type of entity, is based on the Delaware LLC concept, combined with certain aspects of a Cayman Islands Exempted Company and Limited Partnership. The Cayman Islands LLC will allow clients who are familiar with Delaware LLCs to utilize a similar flexible structure based in the Cayman Islands, which does not have the constraints of share capital.
Cayman Islands LLCs are required to maintain a registered office in the Cayman Islands with at least one registered member.
The availability of Cayman Islands LLCs is likely to position the jurisdiction favourably for offshore investment funds; it is expected to be particularly attractive to the private equity industry, family offices and stakeholders looking for a flexible corporate structure, or structure that has similar characteristics of a Delaware LLC.
Reportedly Cayman's Minister of Financial Services, Commerce and Environment Wayne Panton told the Legislative Assembly that "given the position of the Cayman Islands as a leading jurisdiction for investment fund formation, an LLC will increase the versatility and attractiveness of our financial services products and has created a significant buzz in the market place and gives our industry a new product to frame a marketing push around."
The LLC Bill was developed due to industry demand and will allow the Cayman Islands to offer a new investment vehicle in addition to the existing and popular, Exempted Company, Exempted Limited Partnership and Unit Trust Structure.
General characteristics of LLCs vs Corporations:
|Limited Liability Company|
|The most common form of business entity.||Owners of an LLC are referred to as members.|
|Shareholders are liable for the obligations of the corporation to the extent of their capital contribution.||Liability is limited to the extent of their capital contribution.|
|Is taxed as a separate legal entity, and can be incorporated in any state, federal district or territory, irrespective of the place from where it is managed or where its operations are conducted.||Depending on the initial choice of structure, an LLC may be taxed as a disregarding entity, a partnership or a corporation.|
|Is required to maintain a ledger detailing how the company reached important decisions, voting records of shareholders and directors.||LLCs are required to submit annual state reports but aren't required to hold annual shareholder meetings.|
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.