Cayman Islands: Updates To The Cayman Islands Beneficial Ownership Regime March 2018

The Cayman Islands beneficial ownership regime ("Regime"), which came into force on 1 July 2017, requires Cayman Islands companies and limited liability companies (together "Companies") to establish and maintain beneficial ownership registers unless they fall within an exemption to the Regime. Partnerships and foreign companies are out of scope.

Amending legislation which came into force on 13 December 2017 refines the categories of exemption from the Regime so that certain Companies which would have been in scope now fall within an exemption and, conversely, certain Companies which would have fallen within an exemption are now in scope.

Also, a Company that claims an exemption from the Regime is now required to provide its corporate services provider ("CSP") with written confirmation of the specific exemption. This requirement is new.

Details of the specific information to be included in the written confirmation are now available, in the form of amending regulations which were gazetted on 2 March 2018 (namely the Beneficial Ownership (Companies) (Amendment) Regulations, 2018 and the Beneficial Ownership (Companies) (Amendment) Regulations, 2018) (together, the "Amending Regulations").

This advisory summarises the key action points for Companies falling within an exemption. Please see our previous Client Advisories of 10 April 2017 and 5 January 2018 for further details in relation to the Regime more generally.

What details must be provided in the written confirmation?

Where a Company falls within more than one exemption from the Regime, the written confirmation of the exemption need only include the information required for one exemption. Pursuant to the Amending Regulations, the written confirmation of the exemption required to be provided by a Company shall include the following information:

  1. Listed Companies: A Company which falls within an exemption on the basis of being listed on the Cayman Islands Stock Exchange or an approved stock exchange in Schedule 4 of the Companies Act must provide the name of the stock exchange.
  2. Cayman Islands registered or licenced Companies: A Company which falls within an exemption because it is registered or holding a licence under a regulatory law (other than a Company registered as an excluded person under section 5(4) of the Securities Investment Business Law (2015 Revision)) is not required to provide any information. The information is publicly available on CIMA's website.
  3. Companies with "approved person" relationships: A Company which falls within an exemption because it is managed, arranged, administered, operated or promoted by an approved person as a special purpose vehicle, private equity fund, collective investment scheme or investment fund, including where the vehicle, fund or scheme is a Cayman Islands exempted limited partnership, must provide the names of:

    • the approved person;
    • the regulator or the stock exchange that is relevant to the approved person; and
    • the jurisdiction in which that regulator or stock exchange is established.
  1. Companies regulated in equivalent jurisdictions: A Company which falls within an exemption because it is regulated in a jurisdiction included in a list published by the Anti-Money Laundering Steering Group of countries and territories whose Anti-Money Laundering legislation is deemed to be equivalent to the Anti-Money Laundering legislation of the Cayman Islands must provide the names of:

    • the relevant regulator; and
    • the jurisdiction in which that regulator is established.

(e)(i) General partners of Cayman Islands registered or licensed vehicles, funds or schemes: A Company which falls within an exemption because it is a general partner of a special purpose vehicle, private equity fund, collective investment scheme or investment fund which is registered or holds a licence under a regulatory law must provide the name of the partnership.

(e)(ii) General partners of Cayman Islands vehicles, funds or schemes with "approved person" relationships: A Company which falls within an exemption because it is a general partner of a special purpose vehicle, private equity fund, collective investment scheme or investment fund which is managed, arranged, administered or operated by an approved person must provide the names of:

  • the partnership;
  • the approved person; and
  • the regulator or stock exchange that is relevant to the approved person and the jurisdiction in which that regulator or stock exchange is established.

Where, in the case of an exemption under (e)(i) or (ii), the general partner is a general partner of more than one partnership which qualifies for an exemption from the Regime, the written confirmation of exemption need only name one such partnership.

  1. Companies holding certain licensed legal entities: A Company which falls within an exemption because it is holds directly a legal or beneficial interest in the shares of a legal entity which holds a licence under the Banks and Trust Companies Law (2013 Revision), the Companies Management Law (2003 Revision), the Insurance Law (2010 Revision), Part III of the Mutual Funds Law (2015 Revision) or the Securities Investment Business Law (2015 Revision), must provide the name of the relevant legal entity holding a licence under the relevant law.
  2. Subsidiaries: For a Company which falls within an exemption because it is a subsidiary of one or more legal entities described above, the information to be included in the written confirmation of exemption is as follows.

    1. for a Company which is a subsidiary of one or more legal entities falling within an exemption because such exempt legal entities, separately or collectively, hold in excess of 75% of the shares or voting rights in the Company, the names of every such legal entity; or
    2. for a Company which is a subsidiary of one or more legal entities falling within an exemption because each such legal entity is a member of the Company and, separately or collectively, has the right to appoint or remove a majority of the Company's board of directors, the names of every such legal entity; or
    3. for a Company which falls within an exemption because it is a subsidiary of one or more legal entities each of which is itself a subsidiary of one or more legal entities falling within an exemption, the name of the ultimate parent or parents in each chain of exempted legal entities.

The written confirmation of exemption under (g) must also include, in respect of each legal entity named, the section in the relevant legislation that provides for the exemption and such additional information as is relevant to that paragraph.

What if information provided in the written confirmation of exemption changes?

If the Company becomes aware that any information in the written confirmation of exemption provided to its CSP has ceased to be true, within one month the Company must provide its CSP with an amended written confirmation of exemption correcting the erroneous information and including any additional information required by the Amending Regulations, with instructions to file the amended confirmation of exemption with the competent authority.

What are the duties of CSPs in relation to written confirmations of exemption?

A CSP that provides registered office services to a Company which falls within an exemption from the Regime must provide the competent authority with all relevant information from the written confirmation of the exemption (or amended confirmation of exemption) provided by the Company.

This must be done by way of the search platform established pursuant to the Regime, with CSPs required to deposit with the competent authority beneficial ownership information in relation to in scope Companies and information from a confirmation of exemption not less than once in each month (or ninety day period for a Company in liquidation). However, if beneficial ownership information or information from a confirmation of exemption has not changed since the prior deposit, the CSP is only required to deposit a "no change" notice.

Next steps

It remains the case that no prosecution may be commenced against a Company for an offence under the Regime, unless the act or omission that constituted the offence took place at least one year after 1 July 2017. However, Companies should review their status to determine whether this is impacted by the amendments to the exemptions. Each in scope Company should liaise with its CSP to establish a beneficial ownership register if it has not already done so. Clients with their registered office provided by Walkers Corporate Limited as CSP will be contacted. Each Company which falls within an exemption will now need to provide a written confirmation of exemption to its CSP.

Walkers has a detailed understanding of the Regime legislation and is providing assistance to clients with respect to all aspects, including in relation to written confirmation of exemption.

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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