The Cayman Islands Government published The Limited Liability
Companies Bill, 2015 on 18 December 2015 which, when enacted, will
provide for the introduction of a new Cayman legal vehicle, the
Cayman Limited Liability Company (LLC). The draft legislation
closely aligns the Cayman LLC to the United States' Delaware
LLC model which will mean that the new structure will be instantly
recognisable to the US market. This is a significant development
"The introduction of the Cayman LLC will be an important
step for Cayman and will represent an entirely new corporate form
for managers and investors to use in their fund structures,"
says Matt Mulry, Partner, Financial Services, Dillon Eustace
(Cayman). Mulry says that the view among industry practitioners is
that the Cayman LLC might in many cases be a vehicle better suited
to the Cayman investment fund product than a Cayman exempted
company, limited partnership or unit trust.
"The introduction of the Cayman LLC is likely to have a big
impact in Cayman and among those managers and professional advisers
who use the Cayman Islands for their hedge fund and private equity
fund structures. It is likely to gain immediate recognition with US
lawyers and US fund managers and to have an immediate application
in US master feeder structures.
"The Cayman LLC will have the structural flexibility of a
limited partnership, but, crucially, unlike a Cayman exempted
limited partnership the LLC will have a legal personality separate
from its members," explains Mulry. The fact that it has a
legal personality is likely to assist with international tax
Mulry notes that the US LLC has, since its introduction, become
one of the most popular corporate forms in the US and believes that
the Cayman LLC could well become one of the most popular corporate
forms in Cayman. The draft legislation provides for the conversion
of exempted companies to a Cayman LLC, for the merger of companies
into a Cayman LLC and for the redomiciliation of foreign entities
into Cayman as a Cayman LLC.
"It will give US managers the ability to use the Cayman LLC
structure in a way that is familiar to US investors," says
Mulry. "Wide flexibility will be available to craft the
constitutional document of a Cayman LLC to allow bespoke terms to
be created to meet the needs of investors and manager.
"The LLC will be capable of being operated on the capital
commitment and contribution model used in a limited partnership
structure. The partnership, currently, is the preferred vehicle for
private equity funds but I do think hedge funds will also find
benefits in using the Cayman LLC; for example, the more
straightforward valuation and administration of the Cayman LLC as a
corporate entity which represents its investor's interests in a
capital account rather than a fixed number of shares."
By introducing the LLC legal vehicle, Cayman is demonstrating
that it is looking to further support the needs of its biggest and
most important market; the US.
"The introduction of the LLC is a welcome reminder that the
Cayman Government and Regulator is actively engaged with those
involved in the international funds industry and is committed to
positively supporting those market participants whilst at the same
time meeting international calls for greater transparency and
regulation," concludes Mulry.
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