Preface
This publication has been prepared for the assistance of those who are considering the formation of a company in an offshore jurisdiction for the conduct of business outside such jurisdiction, such as a business company ("BC") in the British Virgin Islands established under the BVI Business Companies Act (the "BVI Act"), or an exempted company in the Cayman Islands ("Cayman") established under the Companies Act of the Cayman Islands (the "Cayman Act").
This publication does not deal with all types of companies that may be formed in either of the above jurisdictions, or with the laws and regulations which may be applicable to certain business activities. It deals principally with the more common corporate forms and activities. Certain procedures are summarised but they may require a number of intermediate steps. For the sake of convenience, certain abbreviations are used, such as referring to "governmental approvals", without specifying the particular body or its function.
This publication deals in broad terms with the requirements of each jurisdiction for the establishment and operation of a company. It is not intended to be exhaustive, but merely to provide brief details and information which we hope will be of use to our clients. We recommend that our clients seek legal advice in relation to each jurisdiction on their specific proposals before taking steps to implement them.
Before proceeding with the incorporation of a company in any of the jurisdictions, persons are advised to consult their tax, legal and other professional advisors in their respective jurisdiction.
For current listings of the government fees for each jurisdiction, please contact Conyers.
Conyers
| BRITISH VIRGIN ISLANDS | CAYMAN |
| 1. TYPES OF COMPANIES | |
| A business company ("BC") may be incorporated as a company limited by shares with perpetual existence. In addition, a company may also be limited by guarantee (with or without shares), unlimited, or a segregated portfolio company. | Companies are generally incorporated with limited liability and perpetual existence. An exempted company may also take the form of a limited duration company, a company limited by guarantee, a company limited by shares and guarantee, an unlimited liability company, and a segregated portfolio company. |
| 2. INCORPORATION APPROVALS | |
| No governmental approval is required for the incorporation of a BC. Certain business activities may require licensing. | No governmental approval is required for the incorporation of a company. Certain business activities may require licensing or registration. |
| 3. INCORPORATION PROCEDURE | |
| There is no requirement to publicise an intention to incorporate. A BC is incorporated by the filing of its memorandum and articles of association with the Registrar. Included with the incorporating documents must be a confirmation by the company's first registered agent. The incorporation process can generally be completed within 24 hours. | There is no requirement to publicise an intention to incorporate. A company is generally incorporated by delivery of two signed copies of the memorandum of association and articles of association, if any, to the Registrar. A proposed director of the relevant exempted company must submit to the Registrar a signed declaration to the effect that operation of the proposed exempted company will be conducted mainly outside Cayman. The incorporation process can be completed on an express basis within 24 hours. |
| 4. CONTINUATIONS AND DISCONTINUATIONS | |
| BVI law provides that companies may continue into and discontinue out of the BVI. | Cayman law provides that companies may continue into and discontinue out of Cayman. |
| 5. BUSINESS RESTRICTIONS | |
| Subject to other requirements herein, there are no restrictions on a BC carrying on business within the BVI although certain activities may require a licence from the Financial Services Commission. | An exempted company is not entitled to trade in Cayman with any person except in furtherance of business "carried on outside" Cayman unless the exempted company holds a licence to carry on business in Cayman under any applicable law and it may not offer any of its securities to the public in Cayman, unless it is listed on the Cayman Islands Stock Exchange. Shares of an exempted company may be acquired by other Cayman exempted companies, Cayman non-resident companies and exempted limited partnerships in Cayman. |
| 6. ECONOMIC SUBSTANCE | |
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A "corporate and legal entity" which carries on a "relevant activity" during any financial period and is not resident for tax purposes in a jurisdiction outside the BVI (other than a jurisdiction on Annex 1 of the European Union list of noncooperative jurisdictions for tax purposes) must comply with the economic substance requirements in relation to that activity. "Corporate and legal entities" include BCs, foreign companies, limited partnerships and foreign limited partnerships. "Relevant activities" mean any of the following activities:
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"Relevant entities" carrying on a "relevant activity" will need to comply with economic substance requirements in Cayman. "Relevant entities" include companies (other than domestic companies), partnerships (other than local partnerships) LLCs, LLPs, ELPs, and foreign registered companies and partnerships unless they are tax resident outside Cayman, or an investment fund, or a not-for-profit. "Relevant activities" include:
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| 7. NAMES | |
| The proposed name of the BC can be reserved with the Registrar. The name reservation can usually be confirmed within 24 hours. The name may, however, be reserved for a further period of 90 days upon payment of a nominal fee. One of the words "Limited", "Corporation", "incorporated", "Societe Anonyme" or "Sociedad Anonima" or any of their respective abbreviations must appear at the end of the company's name. | The proposed name of the company can be reserved with the Registrar on a monthly basis for a maximum of 3 months at a time. A small fee is payable for each month the name is reserved. The Cayman Act contains certain restrictions on names. An exempted company need not have the word "Limited" or "Ltd" at the end of its name. A company may have a dual foreign name in something other than Roman script. |
| 8. REGISTERED OFFICE | |
| A BC must have a registered office in the BVI. The address of the registered office is a matter of public record. A post office box cannot be used as a registered office. | Every company must have a registered office in Cayman recorded by the Registrar and published by public notice. The situation of the registered office is a matter of public record. On request, members of the public are entitled to be informed of the location of the registered office of any exempted company registered under the Cayman Act. A post office box cannot be used as a registered office. |
| 9. DIRECTORS, OFFICERS AND REPRESENTATIVES | |
| The minimum number of directors of a BC is one. There is no requirement that any of the directors be resident in the BVI. Corporate directors are permitted. There is no express requirement to appoint any particular officer. The directors may appoint any person, including a person who is a director, to be an officer or agent of the company. A BC must have at all times a licensed registered agent in the BVI. The name of the registered agent is a matter of public record. | The minimum number of directors of a Cayman company is one. There is no requirement that any of the directors be resident in Cayman. Corporate directors are permitted. An exempted company may in its articles provide that a director must hold at least one share in the company. An exempted company must have such officers as are prescribed by its articles. |
| 10. SHAREHOLDERS | |
| Generally, a BC must have at least one shareholder. Nominee shareholders are permitted. A BC must maintain a register of members, a copy of which must be kept at the registered office of the BC, but the register need not be made available for public inspection. | An exempted company must have at least one shareholder. Nominee shareholders are permitted. The names of all shareholders of an exempted company must be maintained in a register of members. The register of members of an exempted company need not be kept at the registered office, and need not be available for inspection by the public or any governmental authority, save in the case of a notice or order under the Tax Information Authority Act. |
| 11. BENEFICIAL OWNERSHIP | |
| Unless exempted by, for example, being listed or regulated, a BC is required to collect, maintain and keep up to date information on the beneficial owner of the BC, which it shall file with its registered agent. Any changes in the beneficial owner or information relating to its interest in the BC must, within 15 days of the change, be notified to the registered agent. | Unless an alternative route to compliance is available, for example, being listed or licensed under a Cayman regulatory law, each company's corporate service provider has an obligation to establish and maintain a register of its beneficial owners to be kept at its registered office. Each company is required to take reasonable steps to identify any registrable beneficial owners which include individual beneficial owners or the company and all Cayman incorporated, formed or registered legal entities that would be beneficial owners if they were individuals. |
| 12. CONSTITUTIONAL DOCUMENTS | |
| The constitutional documents of a BC are its memorandum and articles of association. The memorandum must include: the BC's name; address of the registered office; the name and address of the registered agent; whether the company is limited by shares, whether the company is a guarantee company, whether the company is an unlimited liability company, the maximum number of shares that the company is authorised to issue, the classes of shares, whether the company is a segregated portfolio company and whether or not the company may issue fractional shares. A licence is required for certain types of business activities. The memorandum and articles are binding as between the company and each member, and between each member of the company. The articles must be included when the memorandum is submitted for registration with the Registrar. Both are available for inspection by the public. | The constitutional documents of an exempted company are its memorandum and articles of association. The memorandum of association must specify the name and registered office of a company. It may specify the objects and may provide that business shall be restricted to furtherance of the specified objects. Unless expressly restricted by its memorandum of association, an exempted company can have unrestricted powers. An exempted company is capable of exercising all the functions of a natural person, irrespective of any question of corporate benefit. If no objects are specified, or if the objects are specified but the business of the company is not restricted to the furtherance of those objects, then the company shall have full power and authority to carry out any object not prohibited by law. An exempted company may register articles. The articles only bind the company and its members when registered. If no articles of association are registered with the Registrar, the regulations of Table A of the Cayman Act will apply as the company's articles. Table A will also apply to any articles registered to the extent that the regulations in Table A are not specifically excluded or modified by the articles. In either case, the applicable regulations of Table A apply as the company's articles in the same manner and to the same extent as if contained in duly registered articles. The articles of association provide for the regulation of a company's affairs and will set out the rights and duties as between the company, the shareholders and the directors. The articles of association are not available for inspection by the public. Where articles have been registered, a copy of every "special resolution" must also be filed with the Registrar either annexed to or embodied in the articles. |
| 13. AUDITORS | |
| There are no provisions in the BVI Act for either an annual audit or the appointment of an auditor. | Generally, unless licenced or registered under a regulatory act in Cayman, there is no requirement that an exempted company appoint an auditor or file financial statements with the Registrar or any other governmental authority. Standard articles may provide for the presentation of financial statements and a directors' report at annual general meetings and may provide that this requirement may be waived by the shareholders. |
| 14. BOOKS OF ACCOUNT AND OTHER RECORDS OF THE COMPANY | |
| A BC is required to keep its records and underlying documentation at the office of its registered agent or at such other place as the directors may determine. The records must be sufficient to show and explain the company's transactions and must enable the financial position of the company to be determined with reasonable accuracy. Such records must be kept for at least five years from the date of completion of the transaction in question or the date the company terminates the business relationship to which the records relate. If such records are kept at a place other than the office of the registered agent, the company is required to provide the registered agent with a written record of the physical address of the records. | An exempted company must keep proper records of account with respect to all monies received and expended and the matters in respect of which the receipt and expenditure takes place, all sales and purchases of goods, and the assets and liabilities of the company, as necessary to give a true and fair view of the state of the company's affairs and explanation of its transactions. Articles may provide that the company must keep books of account at its registered office or such other place as the directors decide. If kept outside Cayman, such books and records must be made available at the registered office annually and if an order for production of same is made under the Tax Information Authority Act. |
| 15. DIRECTORS' MEETINGS | |
| Subject to specific regulatory requirements, the BVI Act provides that subject to any limitations in the memorandum or articles, the directors may meet within or outside the BVI as they deem necessary or desirable. Subject to the memorandum or articles, each director must be given reasonable notice of a meeting of the directors. Any action that may be taken by the directors at a meeting may also be taken by them by resolution consented to in writing, without the need for notice. If the articles permit, a written resolution of the board may be passed by such majority of directors as is specified. If the articles do not specify a particular majority, unanimity is required. | Where a meeting is to be held, voting may be undertaken by proxy where the articles permit. Notice of a meeting of the directors must be given in accordance with the articles. A meeting of directors or any committee thereof may be validly convened, subject to the articles, with only one director present in person. |
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