Cayman Islands: Commencement Of The Limited Liability Companies Law, 2016

The Cayman Islands Government published the Limited Liability Companies Law, 2016 (the "LLC Law") by way of Extraordinary Gazette on 8 June 2016 and it is expected to be brought into effect toward the end of June. As readers will be aware from our previous briefings on this topic, the LLC Law allows for the introduction and establishment of limited liability companies ("LLC's") similar in structure to that of the Delaware LLC.

The LLC Law has been developed as a joint effort between the Cayman Islands Government and the Cayman Islands Monetary Authority in consultation with representatives from industry bodies (including Campbells). Campbells is proud to have been integrally involved in the development of the LLC Law through its membership of the legislative sub-committee tasked with reviewing the LLC Law on behalf of industry and accordingly is already in a position to provide clients with detailed insight into the provisions of the LLC Law.

This introduction of the LLC has been eagerly anticipated, particularly by the investment funds and venture capital industry. It will be of interest to fund managers by offering a level of commonality in Cayman Islands structures to those which they  see in the US investment funds market (such as Delaware LLCs).  The LLC Law and LLC concept have been well received by our clients, most notably those in the hedge, private equity and venture capital funds sectors in North America. It is also of interest to those wishing to use Cayman Islands vehicles in corporate transactions, special purpose vehicles and joint venture arrangements due to the differences in duties owed by managers (the LLC equivalent of company directors) and the ability for a written operating agreement (the "LLC Agreement") to allow for provisions such as weighted voting rights of managers.  Fiduciary risk for those managing an LLC can be curtailed when compared to the risks of acting as a director of a Cayman Islands company.

The passing of this new law demonstrates the continued ability of the Cayman Islands to work with market participants in order that it remains the world's leading offshore jurisdiction; flexible and responsive to the needs of clients.


An LLC is similar in key respects to a Delaware limited liability company and the LLC Law is based, in part, on the corresponding Delaware LLC law (the "Delaware LLC Law"). While the Cayman Islands has sought to broadly follow the Delaware LLC Law, it has adapted the LLC Law for consistency with Cayman Islands legal principles by preserving the broad legal principles applicable to companies and the rules of equity and common law.

The LLC is a versatile entity with a hybrid of the benefits of the main two structures used in fund formation being an exempted limited company and the exempted limited partnership. An LLC, in common with an exempted company (and unlike an exempted limited partnership) will be a body corporate with a separate legal personality to its members but will maintain the internal accounting and record keeping flexibility of an exempted limited partnership.  Further, unlike an exempted limited partnership, an LLC will not need to have a separate general partner entity in order to maintain the limited liability of its members and may either be managed by its members in accordance with its LLC Agreement or by 'managers' (who may or may not be members) appointed by the members.

The LLC must have at least one member. Its members benefit from limited liability to the amount of each member's agreed maximum contributions with substantial contractual freedom to agree the internal workings of the LLC vehicle set out in an LLC Agreement within the framework of the LLC Law.

Advantages and Disadvantages


  • Ability to vary fiduciary risk of those managing the LLC;
  • Avoid technical issues of par value and share capital of a company; and
  • Ability to more closely mirror the terms of a US LLC vehicle.

The Cayman Islands is the leading offshore fund jurisdiction and as such, the LLC will complement the current fund structuring offerings and will allow for: (1) more straightforward and flexible 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) flexibility in corporate governance concepts; and (3) a closer synergy between the legal frameworks for onshore vehicles and offshore vehicles, which will be particularly useful in a master/feeder structure where a parallel Delaware onshore feeder is established.

It will be possible for the LLC to be operated / controlled by a majority of members or managers (who need not be members) and who owe no fiduciary duties to the LLC, its members or any other person save that managers will still retain a duty of good faith (unless varied in the LLC Agreement). This will certainly suit those looking for structures where stakeholders can promote and contract for their own interests, without traditional issues of fiduciary responsibilities and associated liabilities of directors of corporate entities, such as those engaged with venture capital, private wealth and family offices or in private equity.


  • Untested in Cayman Islands courts as to how judicial precedent will be applied (for example in evaluating the fiduciary risks for managers);
  • Cayman Islands annual fees to be similar to an exempted limited partnership and hence higher than for an exempt company; and
  • Unfamiliar conceptually to non-US groups.


The LLC is a new vehicle with no current equivalent legal concept in the Cayman Islands and as such there is no Cayman Islands jurisprudence / court decisions on LLCs.   Therefore the LLC Law expressly states the key 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 Law seeks to preserve the rules of equity and common law which are applicable to exempted limited companies. In simpler terms, the current court decisions and judicial precedents which apply to companies will apply to LLCs, but there remains residual uncertainty as to how practically it will apply – for example, will fiduciary good faith obligations be identical for LLC managers as for company directors?  It is expected that the understood current principles of contractual interpretation will apply to the provisions of any LLC Agreement.


The LLC Law provides that the LLC will automatically be incorporated into the following current Cayman Islands laws such that it may also act in the following capacities pursuant to the provisions of such laws:

  • The Mutual Funds Law – such that the LLC can be structured as a mutual fund;
  • The Exempted Limited Partnership Law – such that the LLC can be structured as a general partner of an exempted limited partnership; and
  • The Securities Investment Business Law – such that the LLC can be formed to act as an investment manager or adviser to a mutual fund.


An LLC will be registered with the Registrar of Limited Liability Companies (the "Registrar"), formed in a similar manner to an exempted partnership by submission of a registration statement which contains initial details such as the name (and, if applicable, any foreign translation), registered office and term of the LLC. Note the LLC must have a registered office in the Cayman Islands.   In common with an exempted company or an exempted limited partnership, an LLC will receive a certificate of registration.

The Registrar will record the name of the LLC, the date of registration and any change of name or foreign name.   The LLC Law contains rules on the naming convention of an LLC.  Of principal interest to readers will be that an LLC may, but need not, have "Limited Liability Company", "LLC" or "L.L.C." as part of the name of the LLC.  No other company or entity registered in the Cayman Islands may now use "Limited Liability Company", "LLC" or "L.L.C." in their name, unless they are already registered in the Cayman Islands or will be registered as a foreign company.

Separate Legal Personality

An LLC is a corporate entity which has separate legal personality to its members, so the members have no risk for the LLC's liabilities save to the extent of any agreed unpaid contributions to the LLC. The separate legal personality continues until the LLC's certificate is cancelled by the Registrar deregistering or striking off the LLC.  The LLC Law gives an LLC full power to carry on its business or affairs unless its LLC Agreement provides otherwise.

It may be formed for any lawful business, purpose or activity.

An LLC has the power to indemnify a member or manager and may advance expenses.


The LLC must always have at least one member and there are no Cayman residency requirements for members.   The initial member is admitted upon registration of the LLC.  Members are issued interests, which although akin to a partnership interest also has attributes of shares of a company.  The LLC Law then sets out the manner in which members may be admitted or interests transferred and allows interests to be issued without a contribution and allows for an LLC to acquire, purchase, redeem or otherwise any LLC interest.

The LLC Law allows the LLC Agreement to divide the LLC's interests into classes and/or allow for voting or non-voting interests and allow for meetings or otherwise.

The LLC Law also allows the LLC Agreement to alter most of the provisions in the LLC Law regarding the manner in which such members are admitted or interests issued, allowing substantial contractual freedom.

LLC Agreement

The LLC and its members must enter into an LLC Agreement which governs and regulates its business or affairs. The LLC Agreement must be governed by Cayman Islands law (regardless of any expression otherwise in the LLC Agreement).  The LLC Agreement may, but need not be, executed and is binding regardless of signature.

The LLC Agreement may: (a) provide specific remedies or sanctions or consequences against any member or manager failing to comply with its terms and/or (b) specify the happening of an event which would subject members or managers to specific remedies or sanctions or consequences.

The LLC Law provides that any specific remedies or sanctions or consequences shall not be unenforceable on the basis that they are a penalty or forfeiture in nature, so forfeiture of an interest for defaulting members is in principal enforceable.

The LLC Law also provides that no act nor disposition of real or personal property of or to an LLC shall be invalid because the LLC lacked capacity or power but that the same may be asserted in proceedings by a member or manager against the LLC or by the LLC (through a liquidator or member or managers or other representative) in proceedings against the member or manager (or former member or manager) to prevent the same.

The LLC Agreement need not be filed or registered with the Registrar in line with the Cayman Islands Exempted Partnership Law and the Delaware LLC Law.

Liability to Third Parties

The LLC Law states that no member or manager is to be personally liable for any debt, obligation or liability of the LLC solely by reason for being a member or manager of the LLC. However, through the LLC Agreement or otherwise a member or manager may agree to be personally liable for the debts, obligations or liabilities.

The liability of a member is limited to the amounts contributed or as set out in the LLC Agreement or as otherwise agreed between the member and the LLC. Subject to the LLC Agreement the contribution by a member to an LLC may be in cash, property, other assets including services rendered or any other obligation.

The LLC Law contains the same provisions to protect creditors as are set out in the Companies Law. Any compromise agreement to waive a contribution or return money or other property paid or distributed may only be made where the LLC is able to pay its debts and will remain so immediately following the compromise.

Subject to the LLC Agreement, members may grant security over the whole or part thereof of any LLC interest. The security interest will have priority from the date that written notice signed by each of the secured party and the relevant member, is validly executed and served on the registered office and such notice shall not be validly given unless it specifies the agreement pursuant to which the security interest is granted including the date thereof and the parties thereto, the identity of the grantor and the grantee of the security interests and the LLC interest or part thereof that is subject to that security interest.

Allocations and Distributions

Except for when an LLC is unable to pays its debts as they fall due in the ordinary course of business, the LLC Law allows the LLC Agreement to govern the manner in which distributions are made and profits and losses are allocated among members or classes of interests. If the LLC Agreement is silent as to this the LLC Law allows for distributions of profits and losses to be allocated on the basis of contributions made.

The LLC Law does not allow an LLC to declare, make or pay a distribution to a member or release any obligation where it is unable to pays its debts as they fall due in the ordinary course of business and the LLC Law contains the same provisions as the Companies Law and the Exempted Partnership Law as to limitations on distributions and liabilities of those paid or released from obligation in an insolvency situation.

Subject to the terms of the LLC Agreement, LLC interests are capable of withdrawal on demand of notice by any member(s).


The LLC Law allows the LLC Agreement to appoint any person, with their agreement, to be named or designated as a manager of the LLC to govern the management of the LLC including the rights and duties of the members and managers. A manager may or may not be a member or a party to the LLC Agreement.  An LLC may have more than one manager.  The LLC Agreement may allow for classes or groups of managers (which could for example manage different assets) and set out their relative rights, powers and duties.

If the LLC Agreement is silent, then the management of an LLC vests in its members acting by a majority.

The LLC Law allows the LLC the flexibility to expand or restrict the duties owed by members or managers or persons on any committee acting for the LLC in its LLC Agreement, subject to the minimal duty that any manager must act in good faith in respect of the rights, authorities or obligations to which the manager is subject or exercises or performs, although even this duty is capable of restriction in the LLC Agreement.

Unless otherwise set out in the LLC Agreement or unless acting in a manager capacity (in which case they are subject to the above minimal duty), the LLC Law states that a member does not owe any duty (fiduciary or otherwise) to the LLC or any member in exercising their rights or authorities in respect of the LLC or in performing their obligations under the LLC Agreement.

The LLC Law allows the LLC Agreement to protect the confidentiality of the LLC and restrict access to the books and records of the same, but if the LLC Agreement is silent as to the point, the members of an LLC may have access to inspect the LLC books and records.

Unless otherwise provided in the LLC Agreement, a manager has the power and authority to delegate the rights and powers to manage and control the business.

Winding Up

The LLC agreement may contain details of how the LLC is terminated. Otherwise the LLC Law sets out termination provisions and an LLC may be wound up voluntarily, compulsorily by the Court or under Court supervision.    An LLC may be wound up in the same manner as an exempted company and certain provisions of the Companies Law and Companies Winding Up Rules as applicable to a voluntary liquidation will apply.

Maintenance of Registers

LLCs will be required to maintain a register of members, managers and mortgages and charges and a provision for its books of account to be kept for a period of at least five years. These registers/accounts need to be maintained with the register of members also filed and made available to the Cayman Islands authorities.

Additional Miscellaneous Elements of the LLC Law

The LLC Law allows for the conversion of exempted companies into LLCs, reconstructions, amalgamations and mergers and consolidations. Additionally the LLC Law allows for the transfer in of foreign entities to be registered as LLCs and vice versa.

It is envisaged that future iterations of the LLC Law will allow for conversion of exempted limited partnerships to LLCs and additional flexibility requirements.


The LLC will be a valuable measure to provide flexibility for clients.

Specific legal advice should always be sought whether an LLC is helpful in a particular situation.

View the new Limited Liability Companies Law, 2016 here.

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”

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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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