Tuesday, 9 August, 2016

Cayman Islands Introduce Limited Liability Company Legislation

Vistra Cayman is pleased to announce that the eagerly anticipated Limited Liability Company Law 2016 was passed into law on 8 July 2016, with the first available registration date on 13 July 2016.

From 13 July 2016, it is possible to:

  1. Form and register a new Cayman Islands limited liability company (LLC)
  2. Migrate an entity organised in another jurisdiction into the Cayman Islands as an LLC
  3. Convert an existing Cayman Islands company into an LLC; and
  4. Merge an existing Cayman Islands exempted company into an LLC.

The introduction of the Cayman LLC legislation is in response to demand from the US financial services industry, and is intended to compete with the Delaware limited liability company offering.

The Cayman LLC is a cross between a Cayman exempt limited company and a Cayman exempt limited partnership, two of the most popular vehicles used in the Cayman Islands. It is a corporate body with a separate legal personality and limited liability for its members. However, the LLC is not designated as an exempt entity. The Cayman LLC will be useful in a variety of structures, including investment funds, private equity and private wealth structures, and general corporate transactions which utilise joint venture or special purpose vehicles.

It is worth noting that the law automatically incorporates the LLC into certain existing legislation which allows for its use as a mutual fund, general partner of a Cayman limited partnership, and as an investment manager or adviser.

A Cayman LLC can be established by any one or more persons for any lawful business, activity or purpose whether or not for profit, provided it has at least one member. Members agree to an LLC agreement which is practically the equivalent to an articles of association or a limited partnership agreement. However, unlike the articles of association, an LLC agreement does not need to be filed with the registrar.

 A summary of the LLC

The registration process is simple, requiring the filing of a registration statement and payment of the appropriate fee.

  • A Cayman LLC is a body corporate with a separate legal personality and limited liability, much like a Cayman exempt company, but without having share capital.
  • Similar to a Cayman company, a Cayman LLC may not carry on business with the public in the Cayman Islands except to further its business carried on outside the Cayman Islands. It may also not make invitation to the Cayman public to subscribe for any securities of the LLC unless the LLC is listed on the Cayman Islands Stock Exchange.
  • The LLC is required to maintain a register of members, a register of security interests, a register of managers and a register of mortgages and charges. However, only the register of managers is required to be filed with the registrar and will not be open for public inspection.
  • An LLC may apply to the Cayman Islands government for a 50-year tax undertaking certificate.

The passing of the Limited Liability Company Law 2016 is again another example of the willingness of the Cayman financial services industry to continually evolve and adopt a pro-active approach, listening to the input and the needs of the global industry. The passing of this latest law further cements the Cayman Islands’ position as an innovative and leading global offshore jurisdiction.

If you have any questions regarding a Cayman limited liability company or any other Cayman related services, please do not hesitate to contact a member of the Cayman team via email at cayman@vistra.com and we will be happy to assist.

 

Contacts

Managing Director,
+1 345 769 9381