They've been talked about for a while by our bloggers and contributors but the moment has now come
for the Cayman LLC, which has been available for registration since
13 July and numerous of which have already been formed. The Cayman
LLC was introduced to meet the requirements of North American
managers and intermediaries who use Delaware LLCs and want a
flexible offshore version, and Cayman lawyers dealing regularly
with North American clients are particularly excited about now
being able to offer a "Cayman" version. Its introduction
also highlights Cayman's responsiveness to market demand as it
continues to maintain its position as the dominant brand in North
America for funds structures.
So what makes the Cayman LLC – or limited liability
company, to give it its full name – so interesting?
Well, Cayman's taken the best
bits of the popular limited partnership structure and the best bits
of a company and combined them into an LLC format which is closely
aligned to a Delaware LLC. This makes them both flexible and
familiar for onshore counsel looking to structure new investment
funds and private equity structures. We're also expecting them
to be popular for corporate transactions, including joint ventures,
special purpose vehicles and holding companies where the LLC
agreement can be tailored to suit the particular transaction.
It's pretty straightforward to set one up: with registration
is just a matter of paying a fee to and filing a registration
statement with the Registrar of LLCs in the Cayman Islands. An LLC
is a separate body corporate, can be formed for any legal purpose,
and must have at least one member at all times. There are no Cayman
residency requirements for either members or managers of LLCs, who
can be based anywhere in the world. The LLC needs a registered
office in Cayman, an LLC agreement governed by Cayman Islands law
(similar in form to a Delaware LLC agreement) and must maintain
certain statutory registers (of members, managers, security
interests and mortgages and charges) and records.
The LLC agreement itself can vary certain parts of the LLC Law
to fit with the commercial needs of the parties, and isn't
filed with the Registrar or otherwise publicly available. The
manager/s of an LLC owe a duty of good faith, which can be expanded
or restricted by the terms of the LLC agreement as agreed between
the parties. Otherwise, the members and managers do not owe any
fiduciary duties to the LLC or any member unless this is
specifically provided for in the LLC agreement.
Further features include foreign corporate bodies being able to
migrate into Cayman as an LLC, Cayman exempted companies (other
than segregated portfolio companies) being able to convert into
LLCs, and provisions for mergers and consolidations of LLCs with
other LLCs, exempted companies or foreign companies.
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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When Walkers was launched as an offshore law firm in 1964 in the Cayman Islands it is fair to assume that the founders would never have dreamt their creation would, fifty years later, be working in a cross-border restructuring market driven by China.
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