Jersey: The Cayman Islands Beneficial Ownership Regime

Last Updated: 3 July 2017
Article by Nick Rogers, Giorgio Subiotto and Piers Dryden

Most Read Contributor in Jersey, October 2017

The Cayman Islands beneficial ownership regime (Regime) comes into force on 1 July 2017. It establishes a secure, non-public centralised platform on which beneficial ownership information of in-scope companies (ISCs) must be maintained. From 1 July 2017, both ISCs and "Registrable Persons" of ISCs must comply with the Regime.

Many categories of Cayman legal entities fall outside the scope of the Regime. However, even legal entities that are out-of-scope may be Registrable Persons, with obligations under the Regime and material penalties for breach. Therefore, all Cayman legal entities and their direct and indirect shareholders should consider if they are affected by the Regime.

This Advisory describes which vehicles will be in-scope and which will be out-of-scope; explains who will be beneficial owners and other Registrable Persons; summarises the duties both of ISCs and those who may hold interests in an ISC; and provides practical guidance as to how to ensure compliance.

Practical steps

The following steps should be taken now:

  • For all Cayman legal entities, confirm classification – all legal entities established in Cayman must formally assess whether they are in-scope and document the results of such assessment.
  • For Out-of-Scope legal entities – maintain record that classification analysis has been completed and basis upon which the entity is out-of-scope; implement process to review classification on a regular basis; respond to requests for confirmation from the registered office provider; consider obligation as Registrable Person (see below).
  • For ISCs only, instruct the registered office to establish a beneficial ownership register.
  • For ISCs only, identify the individuals or relevant legal entities who are Registrable Persons (and send notices to persons the ISC considers may be Registrable Persons if necessary) and provide the required particulars to the registered office (see "Obligations of ISCs" for more details).
  • For all individuals and Cayman-legal entities, whether ISCs or out of scope, consider Registrable Person status – irrespective of whether they are in-scope or not, individuals and legal entities incorporated, formed or registered (including as a foreign company) in Cayman should determine if they directly or indirectly own an interest in a Cayman company or LLC. If so, they should try to determine if the company or LLC is an ISC and if the size of their interest may make them a Registrable Person. Cayman companies should document the results of such assessment (see "Obligations of Registrable Persons" for more details).
  • For all individuals and Cayman-legal entities, whether ISCs or out of scope, proactively contact any ISC in respect of which such person believes he, she or it may be a Registrable Person.
  • For all individuals and Cayman-legal entities, whether ISCs or out of scope, respond within 30 days to any legitimate notices received from an ISC requesting particulars of Registrable Persons.

Classification - out-of-scope

Many categories of Cayman legal entities fall outside the scope of the Regime.

  • Partnerships (including exempted limited partnerships) are not covered by the Regime.
  • Trusts (including unit trusts) are not covered by the Regime.
  • Bodies that are not legal persons are not covered by the Regime.
  • Foreign entities that register as "foreign companies" in Cayman are not ISCs.

The following Cayman companies (including LLCs) are not ICSs:

  • companies listed on an approved stock exchange;
  • companies that are registered with CIMA under the Mutual Funds Law;
  • companies registered with CIMA as excluded persons under the Securities Investment Business Law, such as many Cayman-incorporated investment managers and investment advisers;
  • other licensed companies in Cayman such as banks, trust companies and insurance managers;
  • companies managed, arranged, administered, operated or promoted by an approved person as a special purpose vehicle, private equity fund, collective investment scheme or investment fund (a Managed Entity);
  • companies that are general partners of Managed Entities; and
  • companies that are subsidiaries of companies that fall within the above categories, i.e. companies whose out-of-scope parent(s) hold more than 75% of the shares or voting rights of the subsidiary, or the right to appoint and remove a majority of the board of the subsidiary; or companies that are themselves subsidiaries of such a subsidiary.

For the Managed Entity exemption, an "approved person" is a person or a subsidiary of a person that is (i) regulated, registered or licensed under a Cayman regulatory law or regulated in an approved jurisdiction, or (ii) listed on an approved stock exchange.

We expect considerable attention to be focused on the Managed Entity exemption, as terms such as "managed", "administered", "special purpose vehicle" are construed. For example Cayman investment funds that have delegated discretionary management to SEC registered investment advisers in the US or FCA regulated managers in the UK will be exempt as Managed Entities. Other scenarios may not be so clear-cut. Companies that have appointed directors registered under the Directors Registration and Licensing Law will not, for that reason alone, qualify for the Managed Entity exemption.

Classification – in-scope

All Cayman companies and LLCs incorporated in Cayman or registered by way of continuation in Cayman, including ordinary companies, exempted companies and exempted segregated portfolio companies are in-scope, unless they fall within an out-of-scope category as described above.

The types of companies that are expected to be in-scope include:

  • personal holding companies;
  • private trading companies;
  • joint venture companies;
  • holding companies and subsidiaries in private corporate groups;
  • small unregulated funds that are self-administered or managed by a non-regulated manager;
  • some carry vehicles; and
  • private unlicensed businesses trading in Cayman.

Who is a Beneficial Owner?

Beneficial owners are individuals who, in respect of an ISC:

  • hold, directly or indirectly, more than 25% of the company's shares;
  • hold, directly or indirectly, more than 25% of the voting rights of the company;
  • hold, directly or indirectly, the right to appoint or remove a majority of the company's board of directors; or
  • have the absolute and unconditional legal right to exercise, or actually exercise, significant influence or control over the company.
  • have the absolute and unconditional legal right to exercise, or actually exercise, significant influence or control over a trust, partnership or other entity which owns the company.

Regulations provide details of what indirect ownership means.

What is a Relevant Legal Entity?

Relevant legal entities are legal entities incorporated, formed or registered (including by way of continuation or as a foreign company) in Cayman that would be Beneficial Owners if they were individuals. Partnerships, trusts and other bodies that are not legal persons are not relevant legal entities.

Who is a Registrable Person?

Registrable Persons in respect of a company are (i) beneficial owners, and (ii) relevant legal entities that hold an interest in the company or meet one of the above ownership and control conditions directly (set out in respect of Beneficial Owner) in respect of the company and through which any beneficial owner or relevant legal entity indirectly owns an interest in the company.

The result is that, in practice, while there may be multiple relevant legal entities in respect of a Cayman company, only the relevant legal entities at the level immediately above the company will be Registrable Persons. Individuals, on the other hand, will be Registrable Persons (as beneficial owners) even where their interest in the underlying company is held indirectly through a majority interest in multiple entities.

Obligations of ISCs

ISCs have the most extensive obligations. Each ISC must:

  • engage a licensed Cayman corporate services provider (CSP) to maintain an adequate, accurate and current beneficial ownership register for the ISC at the ISC's registered office in Cayman;
  • take reasonable steps to identify individual beneficial owners and relevant legal entities;
  • give notice to all beneficial owners and relevant legal entities requiring such persons to confirm their status as Registrable Persons and their registration details within one month of the notice;
  • provide to its CSP the required particulars of such Registrable Persons once those particulars have been confirmed;
  • instruct the CSP to enter the required details of Registrable Persons into the register, or a nil return; and
  • upon becoming aware of any change to the particulars of a Registrable Person stated in its register, give notice to the Registrable Person as soon as reasonably practicable requesting confirmation of the change.

Obligations of Registrable Persons

Beneficial owners and relevant legal entities also have their own obligations. They must respond to any notice received from an ISC; if they are Registrable Persons, they must confirm or correct their details; and they must state whether or not they know the identity of a Registrable Person or any person likely to have that knowledge.

Registrable Persons have a proactive obligation to notify an ISC that they are Registrable Persons, even where they have not received a notice from the company. Similarly, Registrable Persons must proactively notify an ISC if they know of any change in their status or particulars.

Thus it is not the case that the board of directors of a Cayman company can determine that they are out of scope and automatically proceed as if the Regime does not apply to them.

Default

ISCs and their directors who knowingly and wilfully breach the Regime commit criminal offences and may incur significant fines. Similarly, persons who are Registrable Persons in relation to an ISC under the Regime and do not provide timely and complete information or knowingly make false statements also commit an offence.

In addition to these penalties, an ISC is required to serve a defaulting Registrable Person with a restrictions notice (copied to the Cayman authorities), the effect of which is to freeze dealings in the relevant interests.

Security of Information

Information held on the centralised platform is (i) not available to the public, (ii) air-gapped with no external connectivity to enhance security and (iii) accessible only by the Ministry of Financial Services upon formal lawful request from specific governmental authorities (currently only Cayman and the UK) in relation to financial crime, money laundering and regulatory or tax matters.

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 Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.