Cayman Islands: Sustainability Of Offshore: Using Cayman For Investment Into Africa

Last Updated: 21 October 2016
Article by Lisa Akiri

The use of offshore is an integral part of African financing. Offshore vehicles are used for a variety of structures including bond issuances, listing, loan financing, JVs and PE structures. Investors in and out of Africa have an appetite for using offshore in various transactions because they understand the benefits of structuring transactions, in particular through Cayman Islands vehicles. This need for offshore and the realisation that offshore vehicles are an attractive conduit for foreign direct investment into Africa (FDI) has prompted a few African countries to attempt to mirror the success of Cayman by establishing themselves as International Financial Centres (IFCs).


Mauritius has succeeded in marketing itself as the go-to jurisdiction for Africa and adopted the Limited Partnership Act 2011 to enable it compete with Cayman by making it more attractive for collective investment schemes. However, incorporating a company in Mauritius is more expensive than Cayman, making it less attractive to Africans, who tend to be very cost sensitive with respect to 'offshore'.


The Seychelles are a close second to Mauritius, marketing themselves as an alternative to the British Virgin Islands. However, this jurisdiction is not as favourable as Mauritius due to the various coup attempts in recent years.


In June 2015, the then-President of Ghana, John Dufour, signed a Memorandum of Undertaking with Barclays Bank of Ghana to investigate the potential for creating an IFC. Ghana was threatened with blacklisting by the Organisation for Economic Development (OECD). The then-head of the OECD's Tax centre, Jeffery Owens, stated, "The last thing Africa needs is a tax haven in the centre of the African continent". To avoid blacklisting by the OECD, President John Atta Mills revoked Barclays Bank's offshore banking licence effective June 2011, but the legal mechanism establishing the IFC has not been revoked, making it easy for reactivation at a later stage.


Liberia has succeeded in establishing itself as a 'flag state' and provides corporate and maritime services to vessel owners and operators, often referred to as 'flags of convenience'. It is important to note that Panama's growth in financial services occurred by Panama establishing itself as a 'flag state'. Only time will tell if Liberia will succeed. Liberia has resisted the new global disclosure standards, leaving it open to illegal tax evasion and concealment of foreign wealth.


Botswana exempts firms from paying capital gains tax on exit, and offers low corporate income tax rates and tax holidays. Botswana, like Liberia, has resisted the new global disclosure standards, leaving it open to illegal tax evasion and concealment of foreign wealth.

These African countries lack the long-standing economic and political stability of Cayman. Cayman is at the forefront of offshore structures, as it currently has a substantial trade surplus with the outside world as a result of the activities of the financial community and tourism. Cayman has been white-listed by the OECD, is a full member of the International Organisation of Securities Commissions (IOSCO), and has a stringent anti-money laundering regime in place. Cayman has also implemented legislation to comply with the Foreign Account Tax Compliance Act of the United Kingdom and United States of America (FATCA) respectively, and the OECD Common Reporting Standards (CRS).

There are no exchange control regulations in Cayman, so money and securities of any currency may be transferred to and from the jurisdiction. This is a very attractive variable to those investing from Africa who are prohibited from remitting monies abroad because of currency controls, and who find it difficult to transfer money abroad. An example is the current currency control in Nigeria, which damaged Nigeria's economies as investors and international companies were unable to repatriate their funds and, in some cases, had no choice but to shut down their operations.

The tax neutrality, political and economic stability, professional facilities, a sound judicial system and modern legislation have made Cayman attractive to those investing from Africa who are seeking a flexible and sophisticated jurisdiction for international transactions. The jurisdiction's corporate flexibility and lack of burdensome corporate compliance has made Cayman an attractive domicile for public and private holding companies.

How Cayman is used in Africa transactions

Cayman vehicles are used in a variety of ways in the African finance space:

Aircraft Financing

The Cayman structure vests ownership of aircraft with a Cayman special purpose vehicle (SPV) which acquires the aircraft through funding by way of loan to the lender. The aircraft is then leased by way of operating lease to the airline. The lender then takes security over the aircraft, over the SPV's rights as lessor and usually over the issued share capital of the SPV itself. The SPV is established as an off-balance sheet vehicle with its issued share capital, held by an offshore trust company on charitable trust. The SPV will then grant security over the aircraft in the form of a mortgage and will always grant security over its rights under the lease with the airline which will allow the lender to enforce directly the rights of the SPV against the airline in default.

The charitable trust in Cayman is a method of having an independent person (a trust company licensed by The Cayman Islands Monetary Authority) own the voting shares in the SPV. In the declaration of trust establishing the trust, the trustee will covenant not to wind up the SPV. This enables the SPC to be held as 'orphan', in that no one party has the ability to wind up or take control of the SPV during the life of the transaction.

Ship Financing

Cayman has a first class shipping registry. The typical Cayman Islands structure vests ownership of the vessel with a special purpose vehicle which then acquires the vessel through funding by way of loan from the lender. The vessel is then chartered to a shipping company. As with aircraft financing, the SPV will typically be established as an off-balance sheet vehicle with its share capital held by an offshore trust company or charitable trust. The lender would then take security over the vessel, over the SPV's rights as owner/charterer and usually over the issued share capital of the SPV itself. The principal loan and security documentation will generally be entered into by the SPV rather than the shipping company, thereby avoiding potential enforcement problems in the shipping company's own jurisdiction where the legal system may be different.


To securitise a debt, the bank/originator will firstly incorporate a Cayman SPV to isolate the debt risk from the bank's main operations, and separate the legal rights to the debt, enabling it to be transferred to new holders. The SPV typically purchases assets from the originator (companies that originate loans such as credit card or mortgages may often convert these debt obligations to marketable securities which are the sold to investors), and in turn issues debt securities to raise funds to cover the purchase price. The Cayman SPV will typically be established as an off-balance sheet vehicle with its share capital held by an offshore trust company on charitable trust, in order to be bankruptcy remote. The trustee holds the shares in the SPV for the benefit of the owners of the debt securities. There are no restrictions on the SPV issuing debt securities, as this does not constitute banking business requiring the SPV to be licensed as a bank.


Cayman has been a popular domicile for companies seeking listing of their securities on stock exchanges in London, New York, Hong Kong and Singapore. A Cayman Islands exempted company is normally used for listing. Listings on the Cayman Islands Stock Exchange are often sought because they will qualify from a UK and Irish tax perspective for the quoted Eurobond exemption from withholding tax on interest payable on bonds as the securities will be listed on a "recognised stock exchange".

Cayman Islands law recognises limited recourse arrangements and non-petition covenants. Section 95 (2) of Cayman Companies Law (revised) provides a requirement for the court to dismiss a winding up petition on the grounds that the petitioner is contractually bound not to present a petition against the SPV. Cayman companies are simple to maintain and operate. For example, there is no requirement to hold an annual general meeting (unless the articles of association so provide) or to conduct an annual audit, which provides significant cost and administrative savings. Cayman offers simple incorporation procedures with low registration fees and annual maintenance fees. Incorporation of a Cayman company can usually be completed within the same day. There is no minimum capital requirement. Typically, Cayman companies are incorporated with initial authorised capital equivalent to US$50,000 for approximately US$731.71 in fees which are payable to the Registrar of Companies in Cayman upon incorporation.

In light of some of the negative press that has surrounded the offshore world in recent time, Cayman is still an ideal location for the establishment of offshore vehicles. Its modern courts system, compliance culture and adherence to international standards in terms of tax transparency makes Cayman the go-to jurisdiction for investment into Africa.

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.

Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Maples and Calder
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Maples and Calder
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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