Actions required on Register of Beneficial Ownership for Cayman Companies
March 2018
As previously communicated, the Cayman Islands have recently made several amendments to the Companies Law and the Limited Liability Companies Law (collectively, the “Laws”) and requires Cayman Islands companies, including Limited Liability Companies (LLCs) to create and maintain a beneficial ownership register (“RBO").
The new regime arose out of a commitment agreed with the United Kingdom (UK) Government, by way of an Exchange of Notes in April 2016, by the Cayman Islands, together with other British Overseas Territories and British Crown Dependences, (such as British Virgin Islands (BVI), Bermuda, Mauritius) to enhance existing arrangements on the exchange of Beneficial Ownership Information (“BOI”) to geared to assisting law enforcement agencies combat corruption, money laundering, tax evasion.
Companies within scope
(A) In-Scope Companies
The entities that must comply with the RBO Law are those incorporated or registered by continuation under the Companies Law (as amended) of the Cayman Islands (which includes exempted companies, limited liability companies, ordinary companies and special economic zone companies) excluding those that are "Out-of-Scope" (the "In-Scope Companies").
(B) Out-of-Scope Companies
A Cayman Company that meets the following criteria is exempt from having to create and maintain a RBO is an “Out-of-Scope” company:
- Listed on the Cayman Islands Stock Exchange or an approved stock exchange in Schedule 4 – pages 157 & 158 of the Companies Law (as revised);
- Registered or holding a license under a “regulatory law” (other than a company registered as an excluded person under section 5(4) of the Securities Investment Business Law (2015 Revision);
- Managed, arranged, administered, operated or promoted by an "approved person1" as a special purpose vehicle, private equity fund, collective investment scheme or investment fund, including where the vehicle, fund or scheme is a Cayman Islands exempted limited partnership;
- Is regulated in a jurisdiction approved by the Cayman Islands Anti-Money Laundering Steering Group;
- A general partner of any special purpose vehicle, private equity fund, collective investment scheme or investment fund that is registered or holds a licence under a Cayman Islands regulatory law or is managed, arranged, administered, operated or promoted by an "approved person1";
- Holds, directly, a legal or beneficial interest in the shares of a legal entity that is licenses in the Cayman Islands where the conditions of such licence include full disclosure of the legal and beneficial owners of the licensee;
- A subsidiary2 of any of the above.
How it could affect you
(A) In-Scope Companies
- Each Cayman Islands company, which do not meet certain criteria, must maintain a RBO at its registered office/corporate service provider (CSP) in the Cayman Islands; therefore each Cayman Islands companies are expected to engage a CSP in the Cayman Islands to assist them to establish and maintain their RBO and to provide the required information to the Competent Authority by way of the Platform;
- The Minister charged with responsibility for Financial Services, or a person designated by him (the "Competent Authority") has established a search platform enabling the information contained in the RBO to be searched (the "Platform");
- The company’s CSP will provide the information on the RBO to the Competent Authority in the Cayman Islands by way of the Platform;
- The Platform will be accessible only by the Competent Authority;
- Law enforcement authorities of countries that have entered into an agreement with the Cayman Islands may, through the Financial Crime Unit of the Royal Cayman Islands Police Service, request the Competent Authority to search the Platform on their behalf. Currently, only the UK has entered into such an agreement with the Cayman Islands. Also, certain Cayman Islands regulatory bodies such as the Cayman Islands Monetary Authority ("CIMA") may, if proper and lawful, request the Competent Authority to search the Platform on their behalf; and
- Partnerships and foreign companies are not required to maintain such RBOs, nor are certain other companies, such as Cayman Islands companies listed on an approved stock exchange or those registered with the Cayman Islands Monetary Authority (CIMA).
If the In-Scope Company is unable to maintain and keep its RBO up to date due to the failure of registrable persons to provide required information, the In-Scope Company must issue a restrictions notice to that person. The effect of the restrictions notice in respect of any interest includes, but is not limited to, making any transfer (or agreement to transfer) void and no payment being made of any sums due from the company in respect of the interest. A person to whom a notice has been issued may apply to the Court for any restriction imposed to be set aside. Companies and other persons including directors and officers will each be liable to substantial penalties including fines up to USD61,000 and imprisonment for a term of up to two years for breaches of the new requirements.
(B) Out-of-Scope Companies
Further in pursuant to Beneficial Ownership (Companies) (Amendment) Regulations, 2018 and Beneficial Ownership (LLCs) (Amendment) Regulations, 2018 (together, the “Amending Regulations”) gazetted on 2 March 2018, if a company falls within an exemption to the Regime, it must provide its CSP with written confirmation of the specific exemption.
All Company has within one month period to provide its CSP the amended written confirmation of exemption if it becomes aware that previously provided information has ceased to be true.
Please refer to our Frequently Asked Questions (FAQs) for specific information which shall deposit as accord to the Amending Regulations.
How Vistra can support
All Cayman Islands companies and LLCs must determine if they are In-Scope Companies or whether they fall outside the scope (Out-of-Scope Companies) of the Law. Companies fall within the exemption should take steps to document that they have exempt status under the Law.
If you have require any assistance on classification of beneficial owners and RBO filing for your Cayman Company, please contact your usual Vistra contact or email your enquiries to [email protected].
In the meantime, please refer to our Frequently Asked Questions (FAQs)for further details and actions required for both in-scope and out-of-scope companies.
1 approved person is a person or a subsidiary of a person that is (i) regulated, registered or licensed under a Cayman Islands regulatory law or regulated in an approved jurisdiction (e.g. investment advisors or managers regulated by the Securities Exchange Commission (SEC) or the Financial Conduct Authority (FCA) would fall within this limb), or (ii) listed on the Cayman Islands Stock Exchange or another approved stock exchange.
Approved person DOES NOT include:
An individual who is an employee of a legal entity that holds a license under a regulatory laws as a director or manager; or
An approved person who provides registered office only services in Cayman Islands; or
An individual who is a SIBL Excluded Person.
2 subsidiary being a company or LLC where, (i) more than 75% of the interests or voting rights are, collectively, held by one or more exempt entities or other legal entities; (ii) exempt entities or other legal entities having the right to appoint or remove a majority of directors or managers; or (iii) it is itself a subsidiary of another exempt subsidiary).
