One of the reasons why the Cayman Islands is a leading offshore jurisdiction is the flexibility of Cayman Islands companies  law.  The  main  legislation  regulating  the  formation  and  operation  of  companies  in  the  Cayman Islands is the Companies Law. English common law and equitable principles and precedents are also followed in the Cayman Islands where applicable.

Under the Companies Law a limited liability company may be incorporated as either:

  • an exempted company – a company which has been registered as an exempted company on the basis of a declaration by the incorporating subscriber to the effect that the operations of the company are to be carried on mainly outside the Cayman Islands; or
  • an  ordinary  company  -  a  term  not  directly  defined  by  the  Companies  Law  but  being  the  commonly used term for companies incorporated within the Cayman Islands and not registered as an "exempted company".

Advantages of exempted companies

Exempted companies enjoy a number of privileges and exemptions when compared to ordinary companies and limited liability companies in other jurisdictions and so are frequently used to facilitate offshore financial and trust business. These advantages include:

  • minimal annual reporting requirements;
  • no requirement for Cayman resident directors or shareholders;
  • no  requirement  to  file  an  annual  return  disclosing  details  of  its  shareholders  to  the  Registrar  of Companies (the Registrar);
  • the register of shareholders does not have to be kept at the registered office and is not open to public inspection;
  • no requirement to hold an annual meeting of its shareholders;
  • ability to issue shares with or without nominal or par value;
  • the  company's  name  need  not  end  in  the  word  "Limited"  or  "Ltd."  (please  see  below  for  name requirements for a segregated portfolio company and limited duration company);
  • an ability to deregister itself from the Cayman Islands and transfer by way of continuation into another jurisdiction  where  the  laws  of  that  other  jurisdiction  allow  or  if  incorporated  outside  the  Cayman Islands  a  company  may  seek  to  transfer  and  be  continued  as  an  exempted  company  in  the  Cayman Islands; and
  • an   entitlement   to   receive   from   the   Cayman   Islands   Government,   a   renewable   "Tax   Exemption Undertaking", exempting it from any future Cayman Islands taxes for a period of up to 20 years, which may be extended to 30 years on special application.

General incorporation requirements and procedures

An  exempted  company  is  incorporated  by  the  subscription  (signature)  of  the  initial  shareholder(s)  to  the memorandum of association. Traditionally, the incorporating agent or law firm provides a nominee subscriber for  the  initial  incorporation,  who  signs  the  memorandum  of  association  and  articles  of  association  (which govern  the  management  of  the  company)  to  allow  the  company  to  be  incorporated.  An  incorporation  fee  is payable to the Registrar, which varies depending on the authorised share capital of the company.

Directors and officers

An  exempted  company  must  have  a  minimum  of  one  shareholder  and  one  director.  The  appointment  of officers is optional. There is no requirement for Cayman resident directors or officers.

Declaration by subscriber as to business outside the Cayman Islands

An  exempted  company  may  not  carry  on  business  within  the  Cayman  Islands,  except  in  furtherance  of  its business carried on outside the Cayman Islands. A declaration signed by the subscriber to that effect must be submitted to the Registrar as part of the application to register an exempted company.

Certificate of incorporation

On  filing  the  memorandum  and  articles  of  association,  the  declaration  described  above  and  payment  of  the incorporation  fee,  the  Registrar  will  issue  a  certificate  of  incorporation.  The  certificate  of  incorporation  is conclusive  evidence  that  the  requirements  of  incorporation  and  registration  under  the  Companies  Law  have been met at that date.

Appointment of first directors and first meeting of directors

The  subscribers  to  the  memorandum  of  association  appoint  the  first  director(s)  of  the  company,  who  are usually  representatives  or  nominees  of  the  incorporation  agent  or  law  firm  and  will  hold  a  meeting  or  pass resolutions to deal with initial organisational matters.

The memorandum and articles of association

The  memorandum  and  articles  of  association  (the  M&A)  together  form  an  effective  contract  between  the shareholders  of  the  company,  and  between  them  and  the  company  itself.  The  M&A  set  out  the  respective rights   and   obligations   and   the   procedures   of   corporate   governance   to   be   followed,   within   the   overall framework of the Companies Law, other relevant Cayman Islands statutes and common law principles.

Memorandum of association

The memorandum of association contains:

  • the name of the company;
  • the location of the company's registered office within the Cayman Islands;
  • the objects of the company;
  • a declaration regarding the liability of the shareholders;
  • details of the authorised share capital of the company ; and
  • for an exempted company with shares without nominal or par value, the memorandum of association must detail the aggregate amount for which those shares may be issued. An exempted company may not have shares of both par value and shares of no par value at the same time.

Articles of association

The  articles  of  association  of  an  exempted  company  establish  the  internal  governance,  of  the  company.  An exempted company may adopt the standard or default articles of association in the form of "Table A" set out in the Companies Law or, more typically, adopt a customised M&A in the usual form of the incorporation agent or incorporating law firm.

Amending the M&A

Among other things, an exempted company may at any time by special resolution:

  • alter the objects or powers contained in its memorandum of association;
  • alter or add to its articles of association; or
  • change its name.

A special resolution is a resolution which has been passed by a majority of at least two-thirds of those voting shareholders  at  a  general meeting  (unless  a greater majority  is  specified  in  the  articles  of  association, either generally or for particular matters), or, if authorised by the articles of association, a written resolution signed by all voting shareholders. A copy of any special resolution passed by an exempted company must be filed with the Registrar within 15 days.

The location of the registered office within the Cayman Islands may also be changed at any time, typically by a resolution of the board of directors and by filing notice to the Registrar.


The Companies Law is flexible on the form or classes of shares which may be issued by an exempted company. The M&A typically provide that shares may be issued on approval of a resolution of the directors.

Share premium

When a company issues shares at a premium to par share capital value, whether for cash or otherwise, a sum equal to the aggregate amount of the value of the premiums on those shares is deemed to be transferred to the share premium account. So, for example, if a share with a US$1 par value is issued for a subscription price of US$1,000, this results in a net credit of US$999 to the share premium account. The share premium account is a notional account created under the Companies Law with meaning only in the context of share distributions by  Cayman  Islands  companies.  Funds  credited  to  the  share  premium  account  do  not  have  to  be  placed  in  a separate  account,  nor  does  the  term  have  any  specific  Cayman  Islands  accounting  implications.  Amounts standing to the credit of the share premium account are notionally reduced to the extent that a company funds any dividend, redemption or repurchase amount from such account.

Redeemable shares

Subject  to  compliance  with  the  Companies  Law,  if  authorised  by  its  articles  of  association,  an  exempted company   may   issue   redeemable   shares,   which   are   redeemable   at   the   option   of   the   company   or   the shareholder  (or  convert  shares  issued  as  non-redeemable  into  redeemable).  Care  should  be  taken  when creating  redeemable  shares  as  most  collective  investment  vehicles  issuing  redeemable  shares  are  typically subject  to  additional  requirements  and  regulation  in  the   Cayman  Islands  (see  our  note   -  Regulation   of Investments   Funds).   For   the   protection   of   shareholders,   the   Companies   Law   imposes   a   number   of requirements for the redemption or purchase by the company of its own shares, including:

  • only fully paid (up to par value) shares may be redeemed;
  • redemption  or  purchase  of  shares  may  be  effected  in  such  manner  and  on  such  terms  as  may  be authorised by the company's articles of association or as approved by shareholders' resolution;
  • shares  may  be  redeemed  out  of  any  of  the  profits  of  the  company, share  premium  account, a  fresh issue of shares or out of capital provided that following the redemption or purchase the company will remain  solvent.  Solvency  in  the  Cayman  Islands  is  generally  satisfied  by  a  cash  flow  test  only  (rather than on a balance sheet basis) and the company must remain able to pay its debts as they fall due in the ordinary course of business following the making of the relevant payment.
  • there must be established a capital redemption reserve to avoid reducing the amount of the company's authorised capital.

Fully paid shares may also be surrendered for no consideration.

Treasury shares

Shares which have been redeemed, repurchased or surrendered may be kept by a Cayman Islands company as treasury shares which can subsequently be cancelled or sold by the company. Issuing shares at a discount to par value A  company  may  only  issue  shares  of  any  class  at  a  discount  to  their  par  value  subject  to  an  authorising resolution  of  the  company,  the  approval  of  the  Cayman  Islands  Grand  Court  and  provided  the  company  has been in existence for at least one year. It is rare for exempted companies to issue shares at a discount.

Bearer shares

Bearer shares, ie shares represented by a certificate which does not record the owner's  name and which are transferable upon delivery of the certificate, may be issued by a Cayman Islands company if authorised by the company's  articles  of  association.  Consistent  with   anti-money  laundering  legislation,  the  Companies  Law imposes restrictions on the holding, transfer and disposition of bearer shares, requiring that they be issued to and held by a licensed custodian.

The use of bearer shares is uncommon and may be banned completely in coming years. Harneys Fiduciary will not provide registered office services to companies which issue bearer shares.

Transfer of shares

The M&A of an exempted company will set out how shares may be transferred, typically requiring the consent of the directors and execution of a share transfer form by the transferor. Legal title to the shares will not be transferred until the register of shareholders is updated and so it is crucial that the register of shareholders of the company  is updated  as soon as  possible to record the  transfer. No stamp duty  is payable in the  Cayman Islands on transfers of shares.


An exempted company may declare and pay a dividend or distribution, in cash or in kind, if it is allowed to do so  by  its  M&A.  Payment  can  be  made  out  of  profits  (realised  or  unrealised)  or  the  share  premium  account. Typically  a  dividend  is  approved  by  directors'  resolution,  unless  the  M&A  require  shareholder  approval.  The solvency test referenced above must also be satisfied.

Ongoing requirements for an exempted company Registered office

Registered office

Every exempted company must maintain a registered office within the Cayman Islands to which communications  and  notices  may  be  sent.  The  location  of  the  registered  office  is  a  matter  of  public  record, notified to and published by the Registrar.


Every exempted company must maintain:

  • a register of its shareholders with the names and addresses of the shareholders and particulars of the number  of  shares  held  by  each,  the  share  certificate  number  (if  any)  and  the  date  upon  which  the shareholder became or ceased to be a shareholder;
  • a register of officers and directors containing the names and addresses of the company's officers and directors, including alternate directors; and
  • a  register  of  mortgages  and  charges  recording  the  details  of  all  security  interests  granted  by  the Company over its property.

Theses registers must be kept at the company's registered office within the Cayman Islands, except the register of shareholders which may be kept at any place either within or outside the Cayman Islands but the address at which it is kept must be held by the registered office.

Accounts and auditors

The Companies Law requires that every company keep proper books of account, showing details of all receipts, expenditures, purchases, sales and assets and liabilities of the company, reflecting a true and fair view of the state of the company's affairs and explaining its transactions. A Cayman Islands company may specify any date for its financial year end.

There  is  no  statutory  requirement  under  the  Companies  Law  for  the  filing  or  auditing  of  company  accounts, and how and to what extent  the books of account are made available to the shareholders of the company is generally  a  matter  addressed  in  the  articles  of  association  or  by  the  directors.  Audited  accounts  may  be required  for  companies  which  are  regulated  in  the  Cayman  Islands  under  other  laws,  such  as  mutual  funds. Please contact us for further details.

Please see our guide to Continuing Obligations of Cayman Island Companies for further details of the ongoing requirements for exempted companies.

Annual filing requirements

Every  exempted  company  is  required  to  file  an  annual  return  and  annual  Company  Registry  fees  with  the Registrar in January of each  year. This will be dealt  with by the  registered office provider. The annual return contains a declaration setting out:

  • details of changes, if any, to the company's memorandum of association since the last return;
  • that the operations of the company since the last annual return have been mainly outside the Cayman Islands;
  • that  in  compliance  with  the  Companies  Law,  the  company  is  not  trading  within  the  Cayman  Islands except in furtherance of its offshore business; and
  • that any bearer shares issued are kept by a licensed custodian.

Management of an exempted company

The day-to-day management of an exempted company is delegated by its shareholders to its board of directors and, subject  to  any  express  provisions  in  the  articles  of  association,  the  authority  of  the  shareholders  in  the day-to-day operation of the company is limited to their power to appoint and remove the directors.

The quorum for a meeting of the board of directors is governed by the articles of association and may be one or any greater number specified in the articles.

Shareholders' meetings

Exempted companies are not required to hold annual (general) meetings of shareholders.

The articles of association set out the voting rights and procedural requirements for shareholder meetings, but in  the  absence  of  such  provisions  in  the  articles  of  association,  the  Companies  Law  specifies  that  every shareholder  shall  have  one  vote,  a  meeting  may  be  called  on  five  days'  notice  and  three  shareholders  may summon a general meeting of the company.

Availability of information to the general public

The following information about a Cayman Islands exempted company is publicly available from the Registrar:

  • the name of the company;
  • the type of company (ie an exempted or an ordinary company); and
  • the location of its registered office.

The register of mortgages and charges of an exempted company is open to inspection by shareholders of the company and creditors of the company at the company's registered office.

The  register  of  shareholders  and  register  of  directors  and  officers  of  an  exempted  company  are  not  publicly available in the Cayman Islands.

Inspection rights

Shareholders holding not less than 20 per cent of a company's issued share capital may apply to the court to appoint one or more inspectors to examine the affairs of a company and report on them. Inspectors may also be appointed by special resolution of the shareholders.

The company seal

A Cayman Islands company may have a company seal and, if authorised by its articles, may have duplicate seals overseas. The Companies Law does not require that a physical seal be affixed to documents which are executed under seal. Any contract which is expressed to be executed by the company as, or makes clear on its face that it is intended to be, a deed is deemed by the Companies Law to be executed as if made by deed or under seal. The use of a seal is becoming increasingly uncommon and is not required under Cayman Islands law.

Transfers in and out of the Cayman Islands

Cayman  Islands  exempted  companies  may  apply  to  transfer  out  of  the  jurisdiction  to  another  jurisdiction  by way of continuation. The new jurisdiction must accept transfers in by way of continuation. Overseas companies can also transfer into the Cayman Islands by way of continuation.

Mergers and consolidations

The Companies Law provides a very flexible and user friendly merger and consolidation regime which does not require court approval. See our Guide to Cayman Islands Mergers and Consolidations for more details.

Termination and winding-up an exempted company

An exempted company may be wound up voluntarily (i) by a special resolution passed by the shareholders of the company; (ii) where the period, if any, fixed for the duration of the company by its articles of association has expired; or (iii) because a specific event has occurred, on the occurrence of which its articles of association provide that the company shall be wound up. A company may also be wound up compulsorily by order of the court. On completion of a liquidation, a company is dissolved and cannot be reinstated.

An alternative to liquidation is striking off. This method is best suited to a company that has never traded  or has  been  inactive  for  a  number  of  years  with  no  assets,  no  liabilities  and  no  creditors.  On  request  of  the company,  the  Registrar  has  the  power  to  strike  off  a  company  from  the  register  of  companies  where  the Registrar has reasonable cause to believe that the company is not carrying on business or is not in operation. On striking off, the company is then dissolved but the liability of directors, officers and members is not affected and a struck-off company may be reinstated on an application by a shareholder or creditor for a period of up to ten  years  from  the  date  of  dissolution.  For  this  reason,  companies  that  have  traded  are  usually  liquidated rather than struck off.

Please see our Guide to the Voluntary Liquidation of a Cayman Islands Company for further details.

Foreign companies

Overseas companies which establish a place of business or start carrying on business in Cayman (eg in order to be a general partner of a Cayman Islands exempted limited partnership) must register with the Registrar as a 'foreign company' under the Companies Law. Registration involves a simple filing of specified documents with the  Registrar.  Please  contact  us  for  further  details  about  registering  as  a  foreign  company  and  ongoing requirements which apply.

Exchange control

The Cayman Islands have no exchange control laws. There is therefore no restriction on the movement of funds in or out of the Cayman Islands either by residents or non-residents of the Cayman Islands. Bank accounts may be  kept  in  the  Cayman  Islands  or  any  other  jurisdiction  in  the  world  in  any  currency  and  an  exempted company's share capital may also be expressed in any currency.

Cayman Islands Government fees

The  incorporation  and  annual  fees  charged  by  the  Cayman  Islands  Government  for  the  incorporation  and maintenance  of  Cayman  Islands  companies  are  based  on  the  authorised  share  capital.  Please  contact  us  for further details of the current incorporation and annual fees.


The Cayman Islands has no corporation tax, income tax, capital gains tax, inheritance tax, gift tax, wealth tax or any  other  tax  applicable  to  an  exempted  company  conducting  offshore  business.  Stamp  duty  is  payable  on certain  documents,  generally  at  a  nominal  rate.  Exempted  companies  are  also  entitled  to  apply  for  a  Tax Exemption Undertaking, as described above.

Segregated portfolio companies and limited duration companies

In  addition  to  the  standard  exempted  company  there  are  two  non-standard  exempted  companies  available under  the  Companies  Law  which  share  the  benefits  and  attributes  of  typical  exempted  companies  but  have further features.

Segregated portfolio companies - any exempted company may be registered as a segregated portfolio company (SPC), either  on  incorporation  or  by a  later  conversion. An SPC is a  single legal entity which is able  to  create separate   segregated  portfolios   (each  a   Portfolio),   with  the   assets   and   liabilities   of   each  Portfolio  being statutorily ring-fenced from the assets and liabilities of other Portfolios and the general assets and liabilities of the  company.  The  company  may  issue  one  or  more  classes  of  shares  for  each  Portfolio  and  the  proceeds  of those shares are included in and accounted for in the assets of the Portfolio for which they are issued.

The SPC must include the letters "SPC" in its name, or the words, "Segregated Portfolio Company", and each Portfolio  is   required  to   be   separately   identified  or   designated  and  must   include   in   its   identification   or designation, the words "Segregated Portfolio" or the letters "SP" or "S.P.". The SPC may contract on behalf of or for the benefit of its Portfolios but the contract must identify and specify the Portfolio and that the contract is executed in the name of or for the account of that Portfolio.

Please  see  our  Guide  to  Segregated  Portfolio  Companies  in  the  Cayman  Islands  for  further  details  of  the benefits and operation of SPCs.

Limited Duration Companies - the limited duration company (LDC) is a Cayman Islands corporate vehicle with a limited  life,  corresponding  to  the  'Limited  Liability  Company'  in  the  United  States.  LDCs  do,  however,  have many aspects of corporate existence, including separate legal personality and limited liability. To be registered as an LDC an exempted company must:

  • have a name which ends in "Limited Duration Company" or "LDC";
  • have at least two subscribers or shareholders; and
  • have a provision in its memorandum of association limiting the duration of the company to 30 years or less.

An LDC has the option at any time, on payment of a fee, to cease to be an LDC.

At the end of its term an LDC will normally be voluntarily wound up and dissolved.  An exempted company may not be converted into an LDC.

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.