On 8 July 2016 the Cayman Islands government brought into force
the Limited Liability Companies Law, 2016 (Cayman LLC Law) and
confirmed that the Registrar of Companies would be ready to
register limited liability companies from 13 July 2016.
The Cayman LLC Law was enacted in June 2016 in response to
industry demand generated largely by feedback from the US asset
management industry. The law creates a legal framework for the
formation of Cayman Islands limited liability companies (Cayman
LLCs), which are a type of company with a flexible constitution
determined by contract (LLC Agreement), much like a
Similar in many ways to the Delaware limited liability company,
the Cayman LLC is a company with separate legal personality that
otherwise resembles a limited partnership in having its
members' liability limited by reference to the amounts of
capital they have agreed to contribute (or have contributed) rather
than by shares or guarantee. A Cayman LLC will thus be free from
many of the statutory and common law restrictions that apply to
dealings in company shares as well as the strict distinction
between company ownership and management, with Cayman LLCs free to
leave management in the hands of members or to appoint separate
managers (some or all of whom may also be members).
The Cayman LLC is the latest step in the ongoing evolution of
Cayman's financial services legislation, which has always been
responsive to the needs of the industry. In this case, demand has
come particularly from US institutions seeking a Cayman vehicle
with the features of Delaware limited liability companies. Cayman
LLCs may replace onshore LLCs in some structures where they are
commonly used (for example, as general partners of Cayman exempted
limited partnerships) and in structures with onshore and offshore
components (such as parallel funds) they may replace other types of
Cayman entity because they more efficiently mirror the onshore
The greater flexibility of the Cayman LLC compared to standard
companies is expected to result in their widespread use in complex
structures, such as joint ventures, where a combination of
structural rules and lack of contractual privity among members has
traditionally required a company's constitutional documents to
be supplemented with a separate shareholders' agreement. In a
Cayman LLC the flexibility of its LLC Agreement should typically
eliminate the need for a separate shareholders' agreement.
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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