Cayman Islands: Business Law Developments In The Cayman Islands

Last Updated: 27 October 1997

This year saw further significant legislation enacted in the Cayman Islands to enhance its financial services industry. The establishment of the Cayman Islands Stock Exchange and other principal developments are discussed below.

The Year In Review

With the Cayman Islands Stock Exchange becoming operational on 2nd January 1997, the Cayman Islands can now offer investors, in addition to other wide-ranging financial services, its own stock exchange. Another significant development is new trusts legislation expected to be enacted before the end of this year which will not only permit the creation of non-charitable purpose trusts but will provide an alternative regime under which trusts of any kind may be created. This year also began with the recent enactment of significant legislation designed to combat "money-laundering" and to make provision for asset freezing and forfeiture of criminal proceeds; legislation of this kind now being considered as essential if an offshore jurisdiction is to be accepted as part of the international financial community . Each of these developments are expected to add further weight to the Cayman Islands' status as a leading offshore financial centre.

The Cayman Islands Stock Exchange

The Cayman Islands Stock Exchange ("CSX") offers the opportunity of:

  • listing mutual funds;
  • listing debt securities, in particular the securities of special purpose vehicles; and
  • obtaining a secondary listing for securities already listed on a recognised exchange.

The CSX is especially suited for mutual funds and structured financing vehicles, for which the Cayman Islands have become famous. The majority of funds listed on the CSX are expected to be open-ended investment companies. The Cayman Islands are currently home to over 1,200 regulated offshore mutual funds with almost US$100 billion in assets. However, in the absence of a local exchange until this year, many of these mutual funds were listed elsewhere. For instance, over 80 Cayman Islands mutual funds were listed on the Irish Stock Exchange by 1996. These mutual funds now have the opportunity of listing on the CSX. The CSX is also open to listings by mutual funds not incorporated or established in the Cayman Islands.

In keeping with the Cayman Islands' policy of a free economy governed largely by self-regulation, the listing requirements and procedures of the CSX are more flexible and less onerous than other exchanges. For instance:

  • the CSX will list retail funds incorporated in a wide range of designated countries and is likely to accept funds from any other jurisdiction if investment is restricted to qualified investors with a minimum subscription level of at least US$50,000;
  • the CSX imposes no minimum capital requirements;
  • mutual funds are largely free to choose and change their investment policies;
  • the CSX does not insist on a prescribed degree of investment diversification allowing funds with highly focused investment strategies to be listed;
  • the CSX is committed to competitive listing fees and expediting the listing process.

Listing on the CSX will:-

  • allow wider distribution of an issuer's securities;
  • add credibility and investor comfort;
  • allow investment by certain types of investors who may only legally invest in listed securities;
  • add liquidity.

Listing on the CSX is governed by the listing rules. These contain general rules applying to all issuers and specific sections applicable to the kind of securities for which listing is sought, i.e. mutual fund securities, debt securities, secondary listings. The listing rules seek to achieve a sound balance between (a) providing appropriate issuers with access to the capital market at the earliest possible opportunity, while (b) providing investors with certain safeguards and with sufficient and timely information to enable them to make informed decisions as to the value and merits of the listed securities.

Mutual fund issuers must appoint an approved listing agent who will ensure that the listing rules are followed and that the necessary documents are filed with the CSX. Issuers of debt securities or those seeking a secondary listing are not required to appoint a listing agent.

The most important document that needs to be prepared as part of the listing process is the listing document. The over-riding principle is that this must contain all information which is necessary for an investor to make an informed assessment:

  • as regards the issuer, of its activities, assets, liabilities, financial position, management and prospects and profits and losses;
  • as regards the securities, of their rights, powers and privileges.

The directors or "other operators" of the issuer are responsible for the matters contained in the listing document and there will need to be a responsibility statement to this effect on the front cover of the listing document.

Trading on the CSX is conducted electronically through the Bloomberg network and there is no physical trading floor. As would be expected in the Cayman Islands, being a zero tax jurisdiction, there are no taxes or stamp duties on transactions effected through the Exchange.

Proceeds of Criminal Conduct Law

The Proceeds of Criminal Conduct Law came into force on 23rd December 1996. This law has created various new "money-laundering" offences as well as broadening the enforcement powers of the courts. In particular, the courts will be able to make confiscation orders requiring offenders to pay to the court the financial proceeds or profits of crime and provision is also made for the enforcement in the Cayman Islands of confiscation orders made in the courts of other countries. This law is a further indication of the Cayman Islands continuing commitment to promoting the quality and integrity of the Cayman Islands' financial system.

Special Trusts (Alternative Regime) Law

The bill for the Special Trusts (Alternative Regime) Law 1997 - 'STAR' - has already received its second reading and is expected to reach the statute book later this year. This law responds to the increasing demand in the offshore arena for non-charitable purpose trusts but is different from the purpose trust legislation of other offshore centres, providing a more secure statutory framework for these kinds of trusts. STAR is however far more than simply purpose trust legislation. The new law provides an alternative legal framework within which trusts of any description may be created, provided that their objects are lawful and not contrary to public policy.

Of course, in most situations, the existing trusts regime will be perfectly adequate and, for this reason, it will be wholly unaffected by this new legislation. STAR will only apply to a trust if expressly invoked by the trust instrument. STAR is designed however to provide settlors and their advisers far greater planning flexibility than under the traditional trust framework. It will establish an alternative regime under which all kinds of trusts might be created - trusts for persons, trusts for purposes (charitable and non-charitable) and trusts for a combination of persons and purposes. A particular feature of these special trusts will be the ability to remove "enforcement" rights from beneficiaries and to allow others to be nominated as "enforcers" of the trust. In addition to estate and tax planning applications, it is hoped that there will be a variety of commercial uses also for these special trusts. An obvious application will be the use of purpose trusts for holding shares in special purpose vehicles, private trust companies and other corporate entities when it is problematic for any interested parties to be shareholders themselves.


The Cayman Islands continues to adopt forward-looking legislation to promote its offshore sector and to enhance the financial services and products available in this jurisdiction. Each of the legislative initiatives described above are good examples of this and further technical amendments to the Banks and Trust Companies Law, the Companies Law, the Insurance Law and the Succession Law may be expected in the near future.

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