Cayman Islands: Limited Liability Companies

Last Updated: 22 October 2016
Article by Melissa Lim and Ramesh Maharaj


A limited liability company (an "LLC") is a new type of Cayman Islands vehicle similar to a Delaware LLC. This memorandum describes certain features of an LLC. It is intended to be a summary only, and is not exhaustive. It is not a substitute for detailed legal advice, which can be obtained from your usual Walkers contact.


The principal legislation governing an LLC is the Limited Liability Companies Law, 2016 of the Cayman Islands (the "LLC Law").


Under Cayman Islands law, any one or more persons may form an LLC for any lawful business, purpose or activity, whether or not for profit, provided that the LLC has at all times at least one member. An LLC will be a body corporate with separate legal personality.

The terms of an LLC are invariably set out in a limited liability company agreement (the "LLC Agreement") which allows members to agree amongst themselves the internal workings of the LLC. Members can agree mechanisms such as capital accounts and capital commitments, allocations of profits and losses, allocations of distributions, voting methods (including negative consents) and classes of interests.

The LLC Agreement is not required to be filed or registered with the Registrar of Limited Liability Companies (the "Registrar").

Legal form

From the date that an LLC is registered, it becomes a body corporate and has legal personality separate from that of its members. An LLC will be capable of exercising all the functions of a natural person of full capacity irrespective of any questions of corporate benefit and will have perpetual succession, the capacity to sue and to be sued, defend legal proceedings in its name, and have power to acquire, hold and dispose of property.

Nature of business permitted

An LLC may be formed for any lawful purpose or purposes to be carried out and undertaken either in or from within the Cayman Islands or elsewhere in accordance with the LLC Law, provided that the LLC shall not undertake business with the public in the Cayman Islands other than so far as may be necessary for the carrying on of the business of that LLC exterior to the Cayman Islands.

Certain activities are regulated in the Cayman Islands and an LLC may be required to obtain a licence or to register with the Cayman Islands Monetary Authority if it wishes to carry on such activities. These include banking business, trust business, company management, insurance business, mutual fund administration, business of a mutual fund and securities investment business.

Registration requirements

An LLC is required to be registered with the Registrar in order to bring the LLC within the ambit of the LLC Law. Registration is achieved by the payment of a fee and the filing of a registration statement setting forth:

  1. the name of the LLC;
  2. the address of its registered office in the Cayman Islands;
  3. the duration of the term of the LLC where the LLC has not been formed for an unlimited duration; and
  4. a declaration that the LLC will not undertake business with the public of the Cayman Islands other than so far as may be necessary for carrying on of the business of that LLC exterior to the Cayman Islands.

Once the registration statement is filed, an LLC shall deemed to be registered and the Registrar shall issue a certificate of registration to serve as conclusive evidence that compliance has been made with all the requirements of the LLC Law in respect of formation and registration.

The LLC Agreement can be entered into at any time before, after or at the time of the filing of a registration statement and, if entered into before such filing, shall be deemed to be effective on the date of registration of the LLC.


The name of an LLC may contain the words 'Limited Liability Company' or the abbreviation 'L.L.C.' or 'LLC', but it is not strictly necessary. If an LLC is carrying on special economic zone business, it must include the words 'special economic zone' or the letters 'SEZ' in its name. An LLC may have a dual foreign name, being a name in any language not utilising the Roman alphabet, i.e. using letters, characters, script, accents and other diacritical marks.

Registered office

An LLC must have a registered office situated in the Cayman Islands for the service of process and to which all notices and communications may be addressed.

Residency requirements

There are no residency or qualification requirements for managers or members of an LLC. Corporate managers are permitted.

An LLC is not required to hold meetings of its managers or members in the Cayman Islands or anywhere else unless so required by its LLC Agreement.

Changes to registered details

If a change is made or occurs in any matter specified in an LLC's registration statement, the LLC shall, within 30 days of that change, file a certificate of amendment to the registration statement with the Registrar and pay a prescribed filing fee.

The certificate of amendment must contain the name of the LLC and the amendment to the registration statement.

Amendment of constitution

Provisions governing the amendment of the LLC Agreement can be agreed as the parties wish in the LLC Agreement itself.


At the time of formation and registration of an LLC, a person will be admitted as an initial member. Following registration, membership interests can be acquired, issued, given as part of a plan of merger or consolidation, transferred or assigned. When a foreign company is continued in the Cayman Islands in accordance with the LLC Law or when a company is converted from an exempted company, a person who is a member (or equivalent) of such foreign entity or a shareholder of the exempted company, will be deemed a member of the LLC from the date of continuation or conversion.

Unless the LLC provides another method by which membership takes effect, a person will be formally admitted to membership when they are recorded in the books and records of the LLC. Membership may or may not be evidenced by a certificate of LLC interest.

A person can be admitted as a member without making a contribution or a commitment to the LLC, unless the LLC Agreement provides otherwise.

An LLC can have a sole member and there is no limit on the number of members which can be admitted. An LLC cannot issue bearer LLC interests.

Liabilities to third parties and contributions

The debts, obligations and liabilities of an LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the LLC and no member or manager of the LLC shall be obligated personally for any such debt, obligation or liability of the LLC solely by reason of being a member or acting as a manager of the LLC.

The liability of a member to contribute to the assets of an LLC shall be limited:

  1. to the amount that the member has undertaken to contribute to the assets of the LLC, whether in the LLC Agreement or otherwise;
  2. to making such other payments or performing such services as are expressly set out in the LLC Agreement or have otherwise been agreed between the member and the LLC; and
  3. to such other amounts as may be required to be paid or property required to be returned by the member to the LLC pursuant to the LLC Agreement or the LLC Law.

Contributions of a member may be in the form of cash, property, other assets, services rendered or an obligation to contribute cash, property or assets or to perform services.

Allocations and distributions

The profits and losses of an LLC shall be allocated among the members, and among classes of LLC interests or groups of members, in the manner provided in its LLC Agreement.

If the LLC Agreement does not specify, profits, losses and distributions shall be allocated on the basis of the agreed value (as stated in the records of the LLC) of the contributions made by each member to the extent they have been received by the LLC and have not been returned.

Distributions of cash or in kind by an LLC shall be made or paid among the members and among classes of LLC interests or groups of members in the manner, time and form as provided in its LLC Agreement.

Upon ceasing to be a member, a former member is entitled to receive any distribution such member was entitled to receive under the LLC Agreement and if not provided in the LLC Agreement, within a reasonable time after ceasing to be a member, a distribution for an amount equal to the fair value of that former member's right to share in distributions from the LLC.

An LLC cannot make distributions to its members when it is insolvent. A member who received a distribution or is purportedly released and who had actual knowledge of the LLC's insolvency at the time of the distribution or release shall be liable for the amount of the distribution or for performance of the obligation purportedly released.


Unless otherwise provided in the LLC Agreement, the management of an LLC shall be vested in its members acting by a majority in number. The LLC Agreement can provide that management, in whole or in part, of an LLC, be vested in one or more managers and can also create classes of managers having such rights, powers and duties for the relevant class as specified therein.

The members acting by a majority in number or appointed manager(s) have the authority to bind the LLC.

The managers shall not owe any duty (fiduciary or otherwise) to the LLC or any member or other person in respect of the LLC other than a duty to act in good faith in respect of the rights, authorities or obligations which are exercised or performed or to which such manager is subject in connection with the management of the LLC provided that such duty of good faith may be expanded or restricted by the express provisions of the LLC Agreement.

The members are entitled to exercise any vote as they see fit even though it may not be in the best interests of the LLC or any other member.

Management of the LLC may also be divided into different boards or committees. A person serving on such a board or committee shall not owe any duty to the LLC or any other member, and may, if expressly permitted by the LLC Agreement, act in a manner which the person believes to be in the best interests of a particular member or members (even though it may not be in the best interests of all members or the LLC).

A manager may also be a member. A member or manager may transact business with the LLC and shall have the same rights and obligations with respect thereto as a person who is not a member or manager.

Books and records

An LLC must maintain a register of members containing the name and address of each person who is a member of the LLC, the date on which they became a member and the date on which they ceased to be a member.

The register of members need not be kept at the registered office of the LLC, but if it is kept elsewhere, the registered office should maintain a record of the address at which it is kept. The register of members is not open to public inspection.

An LLC must also maintain a register of security interests over LLC interests and a secured creditor will have priority based on the time and date of the notice of such security interest over the LLC interest is served on the registered office of the LLC.

An LLC is also required to maintain a register of its managers and a register of mortgages and charges in a similar manner to an exempted company incorporated or registered under the Companies Law in respect of its register of directors and officers and its register of mortgages and charges. The register of managers must contain the name and address of each manager and must be filed with the Registrar, however such register is not open to public inspection. The register of mortgages and charges shall be open to inspection by any creditor or member of the LLC at all reasonable times.

Proper books of account including material underlying documentation, including contracts and invoices with respect to money received and expended by the LLC, all sales and purchases of goods by the LLC and the assets and liabilities of the LLC, must be maintained for a minimum period of five years.

The LLC must also maintain in any country or territory a record of the amount and date of the contributions of members, any return of contributions to members and distributions to members.

Transfer of interests

An LLC interest is capable of being transferred in whole or in part as may be expressly permitted in the LLC Agreement provided that any requirements or conditions to the transfer have been complied with or waived.

Defaulting Members

An LLC Agreement may provide that a member or manager who fails to perform or comply with the terms and conditions of the LLC Agreement shall be subject to specified remedies, sanctions or consequences. These remedies, sanctions or consequences shall not be unenforceable solely on the basis that they are in the nature of a penalty or forfeiture. The LLC Law sets out a non-exhaustive list of such possible remedies or consequences of default.

Winding up

An LLC can be wound up voluntarily, compulsorily by the Grand Court of the Cayman Islands (the "Court") or its voluntary winding up may be brought under the supervision of the Court.

An LLC shall be wound up voluntarily when:

  1. the term, if any, fixed for the duration of the LLC in its LLC Agreement expires;
  2. when an event, specified in the LLC Agreement following which the LLC is to be wound up, occurs;
  3. at any time when the LLC has no members (although this may be disapplied in certain circumstances); or
  4. upon the affirmative vote or written consent of at least two-thirds in number of the members of the LLC (although the LLC Agreement may expressly disapply this trigger or provide for an alternative vote or written consent to be provided).

An LLC shall be compulsorily wound up by the Court or its voluntary liquidator brought under the supervision of the Court in the same manner and circumstances as set out in Part V of the Companies Law and the Companies Winding Up Rules. With respect to a compulsory winding up, this will most commonly be ordered by the Court if the LLC is unable to pay its debts (that is cash flow insolvent) or it is just and equitable to do so. However, it should be noted that the Court will dismiss a petition seeking the winding up of an LLC or adjourn the hearing of the petition if the person prosecuting the winding up petition is contractually bound not to have presented the petition to the Court. With respect to a voluntary liquidation being brought under the supervision of the Court, this will be ordered by the Court if the LLC is or is likely to become insolvent or the supervision of the Court will facilitate a more effective, economic or expeditious liquidation of the LLC in the interests of the contributories and creditors.

When in liquidation, the assets of the LLC will be applied in the following order of priority:

  1. to creditors whose status is not derived from their membership (if any) of the LLC;
  2. unless otherwise provided in the LLC Agreement:

    1. to persons who have become entitled to a distribution from the LLC in connection with an LLC interest, in order of priority of the time of such entitlement and to the extent thereof (and pari passu where entitlements are of equal priority); and
    2. to members in connection with and according to the rights of their LLC interest.

This order of priority is subject to taking into account the rights of preferred and secured creditors, agreements as to the subordination or deferral of any claims and to any contractual rights of bilateral or multi-lateral set off or netting arrangements. In the absence of any contractual right of set-off, non-set-off or netting, there will be an account taken of mutual dealings between the LLC and a creditor and the sums due from one party shall be set-off against the sums due from the other.

The provisions of Part V of the Companies Law and the Companies Winding Up Rules shall otherwise largely apply to the winding up of an LLC (whether done voluntarily, compulsorily by the Court or its voluntary winding up having been brought under the supervision of the Court).

Transfer by way of Continuation

Transfer by way of continuation into the Cayman Islands and transfer by way of continuation out of the Cayman Islands are permitted for LLCs.

An LLC may apply to be deregistered in the Cayman Islands in order to transfer by way of continuation into another jurisdiction. Certain requirements must be met for the Registrar to permit the deregistration which include solvency declarations, a statement of assets and liabilities of the LLC, evidence that notice has been given to secured creditors of the LLC of the transfer and evidence that the transfer is permitted by the foreign jurisdiction and the LLC Agreement.

Any foreign entity may apply to the Registrar to be registered by way of continuation as an LLC in the Cayman Islands by complying with the prescribed requirements in the LLC Law and filing the relevant application and paying the relevant fee to the Registrar.

Conversion to an LLC

An exempted company may be converted into an LLC if:

  1. the applicant for conversion passes a special resolution that it should be so reregistered;
  2. an application for registration is delivered to the Registrar together with the necessary documents; and
  3. the exempted company is not a segregated portfolio company.

The special resolution shall adopt a registration statement of an LLC and an LLC agreement in conformity with the requirements of the LLC Law to take effect upon registration of the conversion.

The conversion application must be accompanied by a reregistration fee equal to the fee payable on the registration of an LLC. Following conversion, the LLC will need to apply for a new tax undertaking certificate from the Governor in Cabinet if one is required.

Mergers and consolidations

Two or more LLCs registered under the LLC Law may merge or consolidate. The managers of each LLC proposing to merge or consolidate, need to approve a written plan of merger or consolidation. The plan of merger or consolidation must be authorized by each LLC by way of the approval of a two-thirds majority in number of the members of each LLC or such higher or lower threshold for approval as may be set out in the relevant LLC Agreement.

After obtaining the authorizations and consents required, the plan of merger or consolidation shall be signed by a manager on behalf of each LLC and filed with the Registrar together with, in relation to each LLC, a certificate of good standing and the required manager declarations.

Once the relevant fees have been paid and the Registrar is satisfied that the requirements in respect of the merger or consolidation have been complied with, and that the name complies with the LLC Law, the Registrar shall register the plan of merger or consolidation including a new or amended registration statement and issue a certificate of merger or consolidation.

The merger or consolidation will be effective on the date the plan of merger or consolidation is registered by the Registrar unless the plan of merger or consolidation specifies a later date or until the date of the occurrence of a specified event, but such date shall not be a date later than the ninetieth day after the date of such registration.

Tax status and annual return

An LLC may apply for an undertaking from the Governor that no law enacted in Cayman imposing any tax to be levied on profits or income or gains or appreciations shall apply to the LLC or to any member in respect of the LLC. The undertaking will be for a maximum of 50 years and will also cover estate duty or inheritance tax.

An annual return and the prescribed annual fee must be filed and paid to the Registrar on or before 31 January in every year. Penalties will be levied for late filings.

For an LLC that is not regulated or licensed under any other law, no financial statements need to be filed with any Cayman Islands governmental agency, and no annual audit is required.

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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