Most Read Contributor in British Virgin Islands, January 2017
This concise guide discusses the Cayman Islands Companies
Law (the Companies Law) requirements
relating to the registration of security interests (eg mortgage,
charge, pledge, encumbrance etc) over the assets of a Cayman
Islands exempted company.
There is no public security
registration regime in the Cayman Islands and no publically
Where a security interest is created
by a company and regardless of where the asset is located, it is
necessary under section 54 of the Companies Law to enter any
security interest created by the company in the register of
mortgages and charges of the company (maintained by the company at
its registered office in the Cayman Islands).
Other than to enter particulars of
any agreements entered into by a company creating security
interests in its register of mortgages and charges, it is not
necessary that any transaction documents creating a security
interest be filed, recorded or enrolled with any governmental,
regulatory or judicial authority in the Cayman Islands in order to
ensure the validity of the security interest.
If a company fails to enter a
security interest in the register of mortgages and charges, then
every director, manager or other officer of the company can
potentially be subject to a fine of US$100.
There are no express statutory time
limits within which a security interest must be registered in the
register of mortgages and charges. Generally speaking, security
interests should be registered promptly on creation and we
encourage clients to have the register of mortgages and charges
updated on the day of closing.
Although generally a private
document, the register of mortgages and charges is open to
inspection by any creditor or member of the company at the
company's registered office at all reasonable times.
A failure to register a security
interest as described above, will not otherwise affect the validity
of a security interest. Nor is registration necessary to
"perfect" a security interest.
Registering a security interest in
the company's register of mortgages and charges does not create
priority. As there is no generally applicable statutory regime for
the mandatory filing or registration of security interests created
by exempted companies, it is not possible for Cayman Islands law
firms to express definitive opinions on the priority of the
security interests purported to be created by transaction documents
creating the security. Under Cayman Islands conflict of laws rules,
the relevant law governing the priority and perfection of security
interests will be determined by the location of the asset.
This guide relates only to
registration under the Companies Law. Where the security interest
is created over specific types of asset (the principle examples
being Cayman registered ships and aircraft, intellectual property
and land situated within the Cayman Islands) there are separate
asset based security registration regimes which must also be
complied with which are beyond the scope of this guide. Harneys has
other guides on these regimes which are available on our
A foreign company which is registered
under the Companies Law is not required to maintain similar
registers and is not required to register a security interest in
the way described in this guide unless it re-registers as an
exempted company under the Companies Law.
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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