Do you have Cayman vehicles that you are considering terminating?
If so, you should consider initiating the process now to minimise or eliminate 2020 annual fees. This note contemplates corporate vehicles but similar considerations apply to partnerships.
Termination by voluntary liquidation
The first process available to terminate a vehicle is a voluntary liquidation. Once the vehicle has been dissolved using this process, it cannot be re-instated. You will be able to avoid paying 2020 government fees to the Registrar of Companies (ROC) if the Final General Meeting of the vehicle and all ROC filings have been made by the end of January 2020. In order to meet this deadline, the voluntary liquidation process should be commenced in early December at the latest, to allow sufficient time to meet the various statutory notice periods. Of course, it is always preferable to begin the process as soon as possible. Fees for local services providers, such as registered office fees, may still be due until the entity is finally terminated.
What about a strike-off instead of a voluntary liquidation?
The second process available is a strike-off. A strike-off is a more cost effective and less time consuming option but has the downside that it can be undone for a period of 10 years after the strike-off date. For this reason we don't usually recommend this option where the entity in question has taken in external investors and traded.
If a strike-off is a viable option you will need to have all relevant materials filed before 31 December 2019 to avoid 2020 ROC fees. Fees for local services providers, such as registered office fees, may still be due until the entity is finally terminated.
Additional considerations for Cayman funds registered with CIMA
Terminating Cayman entities that are registered with the Cayman Islands Monetary Authority (CIMA) as funds can also save on 2020 government fees to CIMA, if they move quickly. There are two options available to do this:
- If the fund has passed resolutions to cease trading and to wind up the fund, and a liquidator has been appointed, the fund may apply to CIMA to de-register in advance of year-end and be placed into "Licence under Liquidation" (LUL). A CIMA registered fund that has applied for LUL status by 12:00pm (Cayman Islands time) on 31 December 2019 should not incur any CIMA annual fees for 2020.
- If the fund has passed resolutions to cease trading and to wind up the fund, but a liquidator has not yet been appointed, the fund may still apply to CIMA to de-register in advance of year-end and be placed into "Licence under Termination" (LUT). A CIMA registered fund that has applied for LUT status by 12:00pm (Cayman Islands time) on 31 December 2019 will be liable for only half of the CIMA annual fees for 2020.
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.