Worldwide: FATCA Final Regulations - Update For Cayman And Irish CLO Issuers

On 20 February 2014 the US Treasury and the IRS released a set of revisions to the US Foreign Account Tax Compliance Act ("FATCA") final regulations (the "FATCA Regulations"). Such revisions include modifications to the Limited Life Debt Investment Entities ("LLDIE") provisions in the FATCA Regulations. 

Further to our prior client updates on (i) the Cayman Islands Model 1B (non-reciprocal) intergovernmental agreement with the US (the "Cayman IGA"), and (ii) the Irish Model 1A reciprocal intergovernmental agreement with the US (the "Irish IGA" and together with the Cayman IGA, the "IGAs"), this update provides a summary of the latest position for CLO issuers incorporated in the Cayman Islands and Ireland ("CLO Issuers").


CLO 1.0 Deals 

The revisions to the LLDIE provisions are potentially helpful for the "old and cold" deals, i.e. those CLO (and indeed CDO) issuers that were set up pre-FATCA (essentially prior to March 2010). 

If a CLO qualifies as an LLDIE then the entity will be "certified deemed compliant" under the applicable IGA and will not be required to register with the IRS and report to the Cayman Tax Information Authority (the "Cayman TIA") or Irish Revenue Commissioners ("Irish Revenue"), as applicable, under the local legislation that implements the relevant IGA. 

The CLO will then be able to certify this fact through an amended W-8BEN to agent banks and other paying agents. 

So which CLO 1.0 deals qualify? 

There are six criteria contained in the revised LLDIE provisions (listed (A) to (F)) which all must be met in order for the CLO to qualify as an LLDIE. We have set out all of the criteria in Annex 1 but set out below a brief analysis of the most critical criteria. 

For CLO 1.0 deals the key criteria to be analysed are likely to be: 

(1)  Asset Mix Test 

This is contained in item D which states: "substantially all of the assets of the [CLO] consist of debt instruments or interests therein". 

We understand from preliminary discussions with the US Treasury that: 

(a)       "substantially all" is intended to mean 80% by value; and 

(b)       "interests therein" would include equity interests in wholly owned 'blocker' entities which in turn holds debt instruments as well as credit default and total return swaps which reference debt instruments. 

Another point to be clarified is at what stage this test is to be applied. While many, if not all, CLOs should be able to satisfy this test during the reinvestment period, the same may not be the case when the CLO is in the process of being unwound. We, along with colleagues in the CLO industry, will seek to obtain clarity from the US Treasury on this point. 

(2)  Authority Test 

This is contained in item (F). This provides that the LLDIE exemption is not available where the "[CLO]'s trustee or other fiduciary" or indeed "any other person" is authorised "to fulfil the obligations of a participating FFI". 

Industry has raised the concern that as drafted the directors of the CLO could be said to be "authorised" in the general sense and thus the CLO would not be able to qualify as an LLDIE. 

We have been engaging with key industry participants such as the LSTA and ISDA to clarify the above point with the US Treasury and to the extent necessary with the Cayman TIA and Irish Revenue. 

Existing CLO 2.0 Deals 

In the revised LLDIE provisions there is a "cut off" date of 17 January 2013 such that all deals that issued all its securities before that date and which otherwise comply with the other criteria could be eligible to qualify as an LLDIE. For the purposes of this update, we will refer to these deals as "existing CLO 2.0 deals". 

The main issue with this category of deals is going to be the question of whether the trustee (or some other person) has the authority to ensure compliance with FATCA. Transaction parties should therefore check the deal documents to ascertain whether the existing CLO 2.0 deal is able to qualify as an LLDIE or not. 

If the existing CLO 2.0 deal is unable to fall within the LLDIE definition then we expect those CLOs to be treated as a Reporting Financial Institution, or to use the FATCA Regulations terminology, a "Reporting Model 1 FFI". 

A Reporting Model 1 FFI will need to obtain a Global Intermediary Identification Number ("GIIN") before 1 January 2015 and will be required to report information on US reportable accounts ("US Reportable Accounts") to the Cayman TIA for Cayman Islands based CLO Issuers or Irish Revenue for Irish based CLO Issuers, which, in turn, will transfer the relevant information to the IRS. 

Transaction parties and their counsel should undertake due diligence on all US Reportable Accounts so that the CLO is in a position to register with the IRS for a GIIN in a timely and ordered manner before the 1 January 2015 deadline and thereafter comply with reporting obligations by the due date. 

Reporting of information on US Reportable Accounts by a Reporting Model 1 FFI is not required until September 2015. However, as the information will first be submitted to the Cayman TIA or Irish Revenue, as applicable, it is likely that reporting to the Cayman TIA or Irish Revenue will need this to occur by an earlier date, expected to be the end of June 2015. 

We are aware that there is a concern that agent banks and other potential withholding agents may simply take the view that come 1 July 2014, if the CLO either (i) does not have a GIIN (which would require registration by 25 April 2014) or (ii) is unable to certify itself as a certified deemed compliant entity, then they withhold. 

We are liaising with trustees and paying agents to ensure that they understand that CLOs in Model 1 IGA countries have until the end of this year to register. 

Newer CLO 2.0 Deals 

For those deals that have closed after 17 January 2013 it is clear that the LLDIE provisions will not apply. Therefore as for those existing CLO 2.0 deals that do not qualify as an LLDIE steps should be taken to prepare for registration and reporting as set out above. 

Where MaplesFS can assist 

The MaplesFS FATCA Taskforce has undertaken an analysis of its CLOs over the past 24 months and is now in an advanced position to undertake all necessary action for CLOs that will be classified as Reporting Model 1 FFIs. An update highlighting the current action points being undertaken in practice for CLO Issuers administered by MaplesFS in the Cayman Islands and Ireland will be sent out shortly.

Where registration is required for a CLO that is administered by MaplesFS, an existing director of that entity will procure the GIIN registration on behalf of the CLO. As indicated in our previous updates, there is no requirement to appoint a distinct FATCA 'responsible officer'. A press release issued by the Cayman Islands government on 12 March 2014 confirming the same can be viewed here.

Cayman Islands Legislation Update 

Although the Cayman IGA has been signed, Cayman Islands legislation to implement the Cayman IGA ("Cayman FATCA Legislation") still needs to be adopted in order for its terms to take effect in law in the Cayman Islands. 

We understand from the Cayman Islands Government that they are working towards adopting the Cayman FATCA Legislation in the first half of 2014 through (i) an amendment to the existing Cayman Islands Tax Information Authority Law (primary legislation) expected to adopted in about May 2014; (ii) new Cayman Islands regulations ("Cayman FATCA Regulations"); and (iii) guidance notes to the Cayman FATCA Regulations (the "Guidance Notes"). The Cayman FATCA Regulations and Guidance Notes are expected to be published in  July 2014 or soon thereafter. 

Irish Legislation Update 

It is intended that Irish regulations will be enacted into Irish law by May 2014, accompanied by detailed guidance notes, so that the Irish IGA is fully effective in Ireland from 1 July 2014 (at present the regulations and guidance notes are in draft form).


1 Maples and Calder is only qualified to advise on Cayman Islands, British Virgin Islands and Irish law and does not purport to offer any legal advice on FATCA or the FATCA Regulations, being US legislation. In order to provide the summary in this update, this involves reference, however, to various provisions under FATCA, but only for the purpose of highlighting the relevant terms of the IGAs that could be applicable.

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.

Alasdair Robertson
Scott Macdonald
Nicola Bashforth
Events from this Firm
28 Apr 2016, Webinar, George Town, Cayman Islands

A topical discussion on recent updates covering some of the more frequently asked questions around FATCA and CRS.

29 Jun 2016, Webinar, George Town, Cayman Islands

This webcast focuses on the impact FATCA and CRS are having on structured finance vehicles set up in the BVI, Cayman Islands and Ireland and covers in detail the impending reporting and notification deadlines in each of these jurisdictions.

11 Aug 2016, Webinar, George Town, Cayman Islands

Our panel of experts will reflect on the impact of LLCs in the month since the first available registration date and discuss why the LLC was introduced and how it can be used to help our clients.

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”

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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.