The Cayman Islands Government has published a "green
bill" for a Law to provide for the formation and registration
of Limited Liability Companies: and to provide for incidental and
connected purposes (the "LLC Bill") when enacted into law
this will create a new type of Cayman Islands vehicle, the limited
liability company (an "LLC"). The LLC Bill has been
developed by Government and the Cayman Islands regulator, the
Cayman Islands Monetary Authority, in consultation with
representatives from industry bodies, including Campbells. This new
vehicle will be of interest to promoters of investment funds and
their service providers.
The LLC Bill is expected to be enacted into law during the first
half of 2016. Hence the LLCvehicleis not available yet.
While current Cayman Islands fund vehicles (exempted companies,
exempted partnerships and unit trusts) will continue to serve the
industry and its promoters well, an LLC will offer some flexibility
which is not currently present in certain Cayman Islands
structures. An LLC should allow (1) for more flexible and
straightforward administration of the tracking and calculation of a
member's investment in a fund, without the need to reference
shares and the rigidity of share capital; (2) certain flexibility
in corporate governance concepts; and (3) for a closer synergy
between the legal frameworks for onshore vehicles and offshore
vehicles, particularly useful in a master/feeder structure with a
parallel Delaware onshore feeder (usually an LLC) to the Cayman
An LLC is a versatile entity with the combinedbenefitsof the two
main vehiclesused in fund formation being an exemptedcompany and
the exempted limited partnership; it will essentially be a hybrid
of the two. An LLC, in common with an exempted company (but unlike
a limited partnership), will be a body corporate with a separate
legal personality. However, an LLCmay maintain the accounting,
contractual and record keeping flexibility of an exempted limited
partnership because it is not constrained by being limited by
shares or by guarantee. Further, unlike a limited partnership, an
LLC will not need to have its mind and management in a separate
general partner entity as it will have its management vested in a
'manager' who may, or may not be, a member of the LLC.
An LLC will be easy to register and registration is similar to
the registration of an exempted limited partnership with only the
initial registration statement needing to be filed. The LLC must
have at least one member, its member(s) benefit from limited
liabilityand it may be formed for any lawful business, purpose or
activity. An LLC may be managed by one or more managers who may or
may not be a member. The LLC will need to maintain certain
registers (being a register of members, managers and mortgages and
charges) and may, but need not, include "Limited Liability
Company", "LLC" or "L.L.C." in its
The members have substantial contractual freedom to agree the
management and mechanics of the LLC vehicle in a written operating
agreement (defined in the LLC Bill as the "LLC
agreement") which must be governed by Cayman Islands law.
Appropriate minimal safeguards and a framework are set out in the
LLC Bill (such asminimum statutory duties for members/managers,
record keeping requirements and insolvency provisions).The LLCBill
allows for the conversion of a Cayman Islands exempted company into
an LLC and also the migration into the Islands of foreign entities
to register as an LLC.
The LLC will be a new vehicleand, as such, there is no Cayman
Islands jurisprudence on LLCs. Therefore, the LLC Bill expressly
states certainkey features of an LLC to provide clear guidance to
promoters and their service providers alike. To the extent that
they are relevant to an LLC, the LLC Bill seeks to preserve the
rules of equity and common law which are applicable to exempted
limited companies and exempted limited partnerships.
Further details will follow about the specifics of an LLC when
the LLC Bill is enacted into law.
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.
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