A Cayman Islands exempted company limited by shares is a flexible and versatile vehicle that is quick to set up and easy to maintain. As such, exempted companies formed under the Companies Act (as amended, the Companies Act) are the most commonly used company for offshore vehicles in the Cayman Islands.
A company may apply to be registered as an exempted company if its operations will be conducted mainly outside of the Cayman Islands or pursuant to a licence to carry onbusiness in the Cayman Islands. The incorporating subscriber must provide the Registrar of Companies (the Registrar) with a signed declaration to that effect.
Companies which are not registered as 'exempted' under the Companies Act are commonly known as 'ordinary' resident or non-resident companies. Limited liability companies or 'LLCs' may also be formed under the Limited Liabilities Companies Act (as amended). This guide will focus on exempted companies and any references to a 'company' in this guide include an exempted company.
The Companies Act offers an exempted company a number of advantages which make it a desirable vehicle for those incorporating in the Cayman Islands for the purpose of engaging in business outside of the Cayman Islands. These advantages include:
- no requirement to keep its register of members open for public inspection;
- no requirement to hold an annual general meeting;
- no requirement for Cayman resident directors;
- no requirement to include the word 'Limited' or the abbreviation 'Ltd.' after its name;
- shares may be issued with nominal or no par value;
- capital may be expressed in any currency or in multiple currencies;
- flexibility to transfer the company by way of continuation from another jurisdiction to the Cayman Islands and vice versa; and
- flexibility to alter the memorandum and articles of association without restriction (although the Registrar must be notified of any changes).
An exempted company may also apply for a written undertaking that should taxes ever be introduced in the Cayman Islands, the company will remain tax-free for a period of up to 30 years from the date of the undertaking.
An exempted company is prohibited from: (a) trading in the Cayman Islands except in furtherance of its business carried on outside of the Cayman Islands (unless it holds a licence to carry on business in the Cayman Islands under any applicable law); and (b) making any invitation to the public in the Cayman Islands to subscribe for any of its securities unless it is listed on the Cayman Islands Stock Exchange.
Any one or more persons associated for any lawful purpose may generally incorporate a Cayman Islands company.
Cayman Islands companies can be formed on a same day basis. No prior Government consents or approvals are required. Incorporation documents will usually be returned by the Registrar within five to seven working days, although there is an express service available (for an additional fee) under which documents will be returned within 24 hours.
There are no restrictions on the choice of name save that it must not resemble too closely a name already on the register. It is advisable to check name availability in advance. Certain words are restricted without the requisite regulatory approval, such as bank, insurance, etc.
The fees payable to the Cayman Islands Government on incorporation are based on the authorised share capital of the company. There is no minimum or maximum amount prescribed for authorised, issued or paid up share capital (although at least one share must be in issue at all times). Companies may have share capital designated in various currencies and may issue fractional shares.
A company may, if authorised to do so by its articles, purchase its own shares, including any redeemable shares. Shares may be redeemed or purchased out of the profits of the company, or out of capital provided that, in the case of a payment out of capital, the company remains solvent.
Memorandum and articles of association
The memorandum of association is required to contain certain basic information about the company, including its registered office, its authorised share capital and the objects for which it is incorporated. The objects are typically stated as being unrestricted, which means the company is able to carry on any lawful business, as long as it is carried out mainly outside the Cayman Islands. If the company intends to carry on local business, then an ordinary resident company is required.
The memorandum of association must be filed with the Registrar, together with the following details (which will be open to inspection by the public for a fee):
- the name of the company (and, if applicable, the dual foreign name and translated name);
- the jurisdiction of the registered office, being the Cayman Islands;
- the company number;
- the dates of execution and filing of the memorandum of association;
- the names and addresses of the initial subscribers to the memorandum (and the number of shares taken by each subscriber);
- the amount of capital of the company (and, in the case of a company having its share capital divided into shares of a nominal or par value, the number of shares into which it is divided and the fixed amounts thereof);
- the nature of the business;
- the date of the company's financial year end; and
- if applicable, a statement that the company is limited by guarantee or is unlimited (such companies may omit any particulars in this list which are irrelevant or inappropriate).
The articles of association set out the rights attaching to the company's shares and its internal rules of governance (including powers of directors, conduct of meetings, etc). They are generally drafted so as to provide a permissive and flexible governance regime. The company's articles of association will be filed with the memorandum of association.
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.