The Cayman Islands Stock Exchange ("CSX") was founded in 1996. The CSX has listed more than 4,000 securities and maintains a market capitalisation of more than US$190 billion. However, as the CSX generally specialises in the listing of corporate and specialist debt securities and investment funds, rather than traditional equity listings (equity listings account for only five of the listings on the CSX), in this chapter we primarily focus on the popularity of Cayman Islands companies as listing vehicles on international stock exchanges including the New York Stock Exchange, the London Stock Exchange and the Hong Kong Stock Exchange.
Since the 1990s, the Cayman Islands has been a popular jurisdiction for the incorporation of issuers to be listed on international stock exchanges. As the Cayman Islands continues to develop its legal and regulatory regime to be at the forefront of international standards, we anticipate that the use of Cayman Islands companies as internationally listed companies will continue to grow. Reasons for the use of Cayman Islands companies include:
- A stable political system, recognised as a world-class offshore financial centre.
- The laws of the Cayman Islands are substantially based upon English common law, and a number of "key" English statutes. This gives Cayman Islands law and its legal system a common origin with those of many of the jurisdictions of its users, including the United States. It also means that a company incorporated in the Cayman Islands and its shares are well recognised and accepted around the world, and particularly in New York, London and Hong Kong.
- The speed with which companies can be established, usually within one business day, and without the need for any prior governmental approvals.
- The Cayman Islands has a modern and flexible statutory regime for companies, providing a non-intrusive regime on dividends, redemptions/repurchases and financial assistance for the acquisition of shares, and few ongoing filing requirements.
- The Cayman Islands' status as a tax-neutral jurisdiction: the Cayman Islands has no direct taxes of any kind. There are no income, corporation, capital gains, withholding taxes or death duties.
- The Cayman Islands is recognised by the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and other international bodies for its transparency and standards consistent with those of other major developed countries.
- There are no exchange control restrictions or regulations in the Cayman Islands (unlike many other jurisdictions). This means that funds can be freely transferred in and out of the Cayman Islands in unlimited amounts.
- There is no requirement that a company incorporated in the Cayman Islands should have any local directors or officers. Nor is there any requirement for local service providers (other than a Cayman Islands registered office). Except in the case of entities regulated by the Cayman Islands Monetary Authority, there is no requirement to appoint a local auditor.
The Cayman Islands exempted company is the Cayman Islands vehicle used for the purpose of acting as the listed vehicle in an international IPO. The key features of an exempted company include:
- Same-day incorporation.
- Low government fees on registration and annually.
- It may register with and apply to the government of the Cayman Islands for a written undertaking that, should any applicable taxation ever be introduced in the Cayman Islands, will not be subject to various descriptions of direct taxation, for a minimum period of 20 years (and such certificate can be renewed at the end of that period).
- It is not necessary that any of the shareholders, directors or officers be resident in the Cayman Islands.
- The board of directors can be comprised of such number of persons as may be desired. Typically the Board would consist of at least two persons. No officers are required by law, although it is sometimes convenient for a company secretary to be appointed.
- There is no requirement that any meetings of the board of directors be held in the Cayman Islands.
We regularly act for issuers completing initial public offerings on the large international stock exchanges including:
- New York Stock Exchange.
- NASDAQ Stock Market.
- London Stock Exchange – Main Market and Alternative Investment Market ("AIM").
- Hong Kong Stock Exchange – Main Board and Growth Enterprise Market.
- Toronto Stock Exchange.
- Taiwan Stock Exchange.
Our work has included acting on the New York Stock Exchange listing of Cayman Islands exempted company Alibaba Group Holding Limited, the largest initial public offering of all time as at the date of its listing.
To provide an indication of the popularity of the Cayman Islands exempted company as a listing vehicle of choice:
- during 2015, 151 Cayman Islands companies either completed their stock market listing or announced plans to go public;1
- during 2017, six of the top 20 special purpose acquisition vehicles listed in the US were Cayman Islands companies;
- at the beginning of 2018, there were 20 Cayman Islands companies listed on AIM and nine Cayman Islands companies listed on the Main Market of the London Stock Exchange;
- as of the end of 2017, 1,064 of the 2,015 companies listed on the Main Board of the Hong Kong Stock Exchange were Cayman Islands exempted companies: an increase of 336 since the end of 2015; and
- according to historical statistics published by the United States Securities Exchange Commissions, at the end of 2015 there were 700 "foreign companies" (i.e. non-United States issuers) listed on the New York Stock Exchange and NASDAQ, of which 103 were Cayman Islands issuers, far ahead of any other traditional "offshore" jurisdiction. Only Canada had more companies traded on the main US public markets than the Cayman Islands. As at June 2017, there were 60 Cayman Islands companies listed on NASDAQ and 52 Cayman Islands companies listed on the NYSE.
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1. Cayman Compass, 19 January 2016.
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.