Cayman Islands: The Cayman Islands: A Natural Base For International Groups

Originally published in September 2001

There is a trend towards international groups establishing holding companies with a physical presence in offshore jurisdictions. The use of offshore holding companies is not new. What is new is the motivation for their use.

Historically the use of offshore holding companies was driven largely by taxation mitigation and in the right circumstances depending upon, amongst other factors, the location of investors, the source of profits and the existence of double tax treaties between the relevant jurisdictions, a holding company in an offshore jurisdiction could provide taxation savings. Onshore jurisdictions spent and still spend considerable time and effort countering the tax motivated use of offshore holding companies.

The new motivation for establishing an offshore base is not directed primarily at reducing taxation but rather introducing greater flexibility in the way international groups operate. This manifests itself in the form of a physical presence (personnel and leased office space) and substantial activities (not of the manufacturing kind but in the form of a few key personnel engaged in management, treasury, marketing or sales operations). Ironically, establishing a physical presence for commercial reasons may in fact assist the tax arguments, but that is another matter.

The trends which have prompted this new approach are first, the globalisation of business, secondly, the globalisation of share ownership both directly and through mutual funds of one sort or another and thirdly, the mobility of manpower and resources. The development of the offshore jurisdictions in terms of infrastructure and recognition has also helped. In many ways some of the so-called "offshore jurisdictions" (a term which is often used pejoratively) have become effectively zero-tax onshore jurisdictions now that it has been recognised that revenue collection by means other than direct taxation is not a matter for international disapproval.

Many businesses operate across borders with no particular jurisdiction offering itself as the natural base for the business in terms of the location of supervisory, management or treasury functions or as the place from which products manufactured and assembled worldwide are sold. This is particularly the case with the new technology companies where product development may take place in one jurisdiction, production of components in another and assembly in a third.

The globalisation of share ownership through both direct investment and mutual funds means that shareholders are no longer regional in their investments – they are prepared to invest in entities which are perhaps, initially at least, unfamiliar to them in terms of corporate mechanics.

The mobility of manpower and resources is a result, in part, of the development of worldwide communication. Nowadays a manager can often operate from almost anywhere in the world given the appropriate technology. There is no natural place for them to be to do their job.

Given these trends many businesses are considering why their base – which can mean the conduct of any of the management, treasury, marketing or sales functions already referred to - is located in a particular jurisdiction. Often the location has not been selected at all but determined almost accidentally based on events in the development of a business. Allowing the base to be determined without considering the international nature of the business is unfortunate because moving offshore later, whilst not impossible, can give rise to some difficult issues including the inevitable accusation that the move is entirely motivated by taxation. Starting with the correct offshore structure at the outset is the best approach.

One offshore location which has seen an increasing number of international groups, both listed and private, establish a physical presence on its shores is the Cayman Islands. Ignoring taxation issues, which may produce benefits or burdens depending upon the circumstances, there are many reasons why having a base with a physical presence offshore, such as the Cayman Islands, may be beneficial.

Central time location

For businesses operating in Asia, Europe and the Americas, a jurisdiction with a central time location like the Cayman Islands can offer several benefits from the point of view of coordinating and managing the business – not only in terms of overlapping time zones but also reduced travel times and costs.

Access to Markets

Locating offshore gives treasurers access to capital markets and financial products which may be unavailable or restricted onshore.

Corporate Flexibility and Group Planning

The Cayman Islands legal system is based on English common law with the addition of local statutes which have changed the common law so as to meet the demands of a modern legal system. As such the Cayman Islands provides an ideal base from the point of view of corporate structuring offering ready solutions for joint ventures, vehicles for direct investment and for highly structured transactions. It also offers a highly flexible approach to repatriation and distribution of funds. In particular, shares of a Cayman Islands company may be redeemed or repurchased if the Articles of Association so provide, and repayment of par value or premium may be made out of the share capital, share premium account or capital if the company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. Dividends may be paid out of profits or, subject to a solvency test, share premium (i.e. the difference between the subscription price for shares and their par value). The definition of profits is not governed by statute but by the Articles of Association and common law and may include income and realised and unrealised gains. The share premium account may also be used to fund a bonus issue and a cash dividend, subject only to the company being able to pay its debts as they fall due in the ordinary course of business following the date of the distribution.

There is also no exchange control in the Cayman Islands on the movement of funds.

Light Regulation

A business not involved in financial services is not likely to be subject to regulation in the Cayman Islands in respect of its activities as such. It may be necessary for the entity to obtain certain licenses in respect of its establishment, however, if it carries on its business in such a way that it conducts its business in the Cayman Islands and works permits will be required for non-Caymanian employees.

Corporate Compliance

There are no burdensome general corporate compliance requirements in the Cayman Islands. The following points should be noted:

  • A company must maintain a registered office in the Cayman Islands at which must be kept:-

    1. the register of mortgages and charges;
    2. the register of officers and directors.

  • Although considered convenient, there is no requirement to maintain the minute book in the Cayman Islands as a matter of Cayman Islands law.
  • No requirement exists under the Cayman Islands Companies Law to appoint Cayman Islands resident directors or officers, a resident representative or any other service providers in the Cayman Islands.
  • Cayman Islands law does not mandate the location of the share register (unless the company is an ordinary company) which need not be maintained in the Cayman Islands if it is inconvenient to do so. If the company is an ordinary company the register must be maintained at the registered office in the Cayman Islands.
  • There is no obligation to notify publicly of the intention to close the register. The position is governed by the Articles of Association.
  • A Cayman Islands exempted company is not required by law to hold an annual general shareholders meeting but may determine to do so pursuant to the Articles of Association. The location of the meeting is a matter for the Articles of Association. An ordinary company is required to hold an annual meeting of its shareholders but again this need not be in the Cayman Islands. Many Cayman Islands incorporated listed companies do nevertheless hold their annual general meetings in the Cayman Islands.
  • No requirement to appoint auditors or to file accounts with any Cayman Islands Governmental authority. The matter is governed by the Articles of Association and applicable listing rules. Directors are under a statutory obligation to maintain such accounts as are necessary to give a "true and fair" view of the company’s financial standing and to explain its transactions.
  • Incorporation and annual filing fees are low and depend upon the size of the authorised capital.


Cayman Islands companies have been listed on NASDAQ, the New York Stock Exchange and the Hong Kong Stock Exchange. Many of these Companies started life as Cayman Islands incorporated companies and have therefore been through the complete international public offering process (rather than simply being redomiciled to the Cayman Islands after initial listing in another jurisdiction).

There are no prospectus filing requirements in the Cayman Islands for a public company and there is no Cayman Islands Governmental or regulatory review. No Governmental approval is required for transfer of securities.

Anti-takeover provisions and financial assistance

Subject to an overriding duty on the directors to act in good faith and in the interests of the Company, it is possible to structure a range of anti-takeover provisions into the constitutional documents and as directors powers. Furthermore subject to the above qualification relating to directors duties, financial assistance may be provided for the acquisition of shares in a Cayman Islands company.

Migration Provisions

A Cayman Islands exempted company may migrate (without reincorporation or transfer of assets and liabilities) to (or from) certain other jurisdictions. There are a number of examples of companies (some of them listed) formed in a number of states in the United States using similar provisions to migrate offshore.


At a time when the Cayman Islands is being assisted by the onshore jurisdictions in its fight to remove the remnants of foreign tax evasion from its shores to leave legitimate investors and international institutions, it is interesting to detect a trend towards the establishment of physical presences for general commercial reasons when taxation planning, although obviously a relevant factor, is no longer the primary motive. Although not suitable for all businesses, for those which have no natural base, it appears that offshore may well be the place to be for key management, treasury, marketing or sales operations.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions