We are pleased to report that the Limited Liability Companies
Law, 2016 (Law) came into force on 8 July 2016, making the Cayman
Islands limited liability company (LLC) available for the first
time in the jurisdiction. We expect the regulations under the Law
to be gazetted in mid-July.
The introduction of the LLC responds to requests made by the US
financial services industry for such a vehicle. As a result, the
Law reflects many key features of Delaware's Limited Liability
Company Act and those familiar with that Act will recognise
features with certain modifications to conform with Cayman Islands
law and concepts.
What is an LLC?
Essentially, the LLC is a hybrid entity, merging certain
characteristics of a Cayman Islands exempted company with those of
a Cayman Islands exempted limited partnership.
Within the parameters of the Law and other Cayman Islands laws
applicable to LLCs, members of an LLC are free to agree on
regulations governing management of the LLC, contributions by
members and distributions and conduct between themselves pursuant
to an LLC agreement. Express provisions of the Law create priority
in respect of security interests granted by members in respect of
their LLC interests. Members owe no duty (fiduciary or otherwise)
to the LLC or its members (except if a member also acts as a
manager of the LLC, in which case the Law imposes a duty of good
faith in exercising the rights and authorities and obligations of a
manager, subject to any higher duty that may be imposed under the
KEY FEATURES OF AN LLC
Uses of an LLC
The LLC provides a significant alternative structuring option to
complement the existing choice of vehicles in the Cayman Islands.
We believe our clients will embrace the LLC as the suitable form of
business vehicle in certain circumstances; it can be useful in a
variety of areas including the structuring of investment funds
(especially where the structure already includes one or more
limited liability companies registered elsewhere), general
corporate transactions requiring joint venture or special purpose
vehicles and venture capital, private wealth and private equity
It should be noted that the Law automatically incorporates the
LLC into certain existing legislation to allow for its use as a
mutual fund, general partner of an exempted limited partnership and
as an investment manager or advisor.
Appleby is already advising on continuations of foreign entities
into the Cayman Islands as LLCs and the content of proposed LLC
The Law is the natural outcome of the Cayman Islands paying
attention and responding to the input and needs of global industry
and its participants and further consolidates the Cayman
Islands' position as a leading offshore jurisdiction.
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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