Jurisdiction of the month: Cayman Islands

2015 03 25 | Category: News

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Geography, Population, Languages

The Cayman Islands are a group of islands situated in the Caribbean Sea (West Indies) approximately 500 miles south of Miami, Florida. There are three low-lying islands: the main island, Grand Cayman, is situated approximately 1,150 km south of Florida; then there is Little Cayman, and Cayman-Brac. The total area of the three islands is 260 sq. km, with Grand Cayman having an area of 200 sq. km. The Cayman Islands’ climate is tropical with average temperatures of 15-30 C. Rainfall is light between the months of November to April, which is the winter season.

The population of the three islands is approximately 55,000, the majority of whom reside on Grand Cayman. The administrative centre is George Town (on Grand Cayman Island). The official language on the Cayman Islands is English.

History, Political Structure and Law

Christopher Columbus discovered the Cayman Islands in 1503. The Cayman Islands are a British colony, and therefore the United Kingdom Parliament at Westminster retains the right to legislate. The Cayman Islands enjoy sophisticated legal, accounting and banking services and derive political stability from their connection with Britain. The Government is headed by the Governor, who is appointed by the English Queen and responsible for all of the civil service, law, defence, and foreign affairs. The Government is a Legislative Assembly consisting of 12 elected members, the Financial Secretary, the Attorney General and the Administrative Secretary. An Executive Council, consisting of three official members appointed by the Governor and five members elected by the Legislative Assembly, formulates policy and advises the Governor. The Islands’ Common Law is based on English Common Law.

Economy and Infrastructure

The economy of the Islands is highly developed. There is almost full employment on the Islands, with most revenue being derived from tourism and the financial services sector. The Cayman Islands are an important world financial centre. The Cayman Islands have become the jurisdiction of choice for many financial institutions. There are over 500 banks registered there. Tropical agriculture, the timber industry, fishing and the export of seafood are highly developed. There are excellent communication facilities: telephone, fax and telex, with direct dialling to and from the rest of the world. There is a highly developed airline system. Miami is one hour away by air and the Island has direct air links with New York, Atlanta, Houston, Tampa and Jamaica. The islands are a popular stop for cruise-ships. The official currency on the Islands is the Cayman Dollar. There are no exchange controls and no restrictions on the movement of funds to or from the Islands.

Company Incorporation

The principal corporate legislation is The Company Law of the Cayman Islands. This legislation is based on the English Companies Act (1948) and can be found in the Cayman Islands Companies Law of 1960 (amended). The Confidential Relationships (Preservations) Law makes it a criminal offence for any person to divulge confidential information to a third party, or to wilfully obtain or attempt to obtain confidential information relating to a Cayman Island company. The Law imposes a maximum penalty of a CI$ 5,000 fine and/or a term of imprisonment of up to 2 years.

The type of Company used for international business and investment is an Exempt Company. A Cayman Islands Exempt Company has a structure very similar to a Turks & Caicos Islands (TCI) Exempt Company (the legislation of the latter being closely based on the Cayman Islands legislation). A Cayman Islands Exempt company has all the powers of a natural person. The language of legislation and corporate documentation is English. A company can be formed with or without limited liability. Liability can be limited by shares or by guarantee. The Memorandum of Association may provide that members of a certain class have unlimited liability in a dissolution. Companies may have a limited duration or a perpetual existence.

The following restrictions apply to company trading and business activities:

• An Exempt Company is not allowed to trade within the Cayman Islands or own real estate in the Cayman Islands.
• A Company has no right to engage in the banking, insurance or mutual funds business without a licence.
• A Company cannot solicit funds from the public.
Incorporation procedure for an Exempt Company involves the submission of the Memorandum and Articles of Association and payment of a registration fee to the Registrar of Companies. A sworn statement declaring that the business activities of the proposed company will be undertaken mainly outside the Cayman Islands is obligatory.

Names and addresses of the proposed first directors must be disclosed to the Registrar. As a matter of local company law the company must maintain a registered office address within the Cayman Islands and must also appoint a Cayman Island resident as registered agent. Off-the-shelf Companies are available.
Company names are subject to the following restrictions:
• A Company name can be expressed in any language that uses the Latin alphabet, provided that the Registrar of Companies receives a translation thereof.
• A Company name cannot include the words Bank, Insurance, Assurance, Reinsurance, Trust, Municipal, Charter, Co-operative, or their foreign language equivalents.
• A Company cannot use a name that, in the opinion of the Registrar, would suggest a connection with a Royal family or Government body.
• The words Bank, Building Society, Savings, Loans, Insurance, Assurance, Reinsurance, Fund Management, Asset Management, Trust, Trustees or their foreign language equivalent require consent or a licence.

There is no requirement to utilise a suffix to denote limited liability, although normally it is recommended that companies include the suffixes Limited, Incorporated, Corporation or abbreviations thereof.

The minimum number of directors is one. Directors may be natural persons or bodies corporate. Details of the directors must be passed to the Companies Registrar, but this information is not available for public inspection.

Directors do not have to be resident in the Cayman Islands, but one statutory meeting of the directors must be held within the islands every year. This may be done more conveniently by the appointment of proxies. The Cayman Islands Companies Ordinance does not make any specific reference to a requirement for a company secretary to be appointed. However, it is customary to do so, and this may be either a natural person or a body corporate. The minimum number of shareholders is one. Details of shareholders are not maintained on public record. Shareholders, officers and directors of any company may be of any nationality, but foreign nationality will have a bearing on the licensing of Ordinary companies seeking to carry on local business.

A company may have an authorised capital in any amount or currency and which may be divided into different classes of shares. It is normal to incorporate with an authorised share capital of US$ 50,000 divided into 50,000 common voting shares of US$ 1, this being the maximum to qualify for the minimum capital duty payable to the Registrar of Companies. The minimum issued share capital is one share of without par value, or one share with par value, but it cannot have both types of shares. The following classes of shares are permitted: registered shares with par or without par value, bearer shares, preference shares, redeemable shares and voting or non-voting shares.

Bearer shares must be kept in the custody of an “authorised custodian”, which is defined as a bank or trust company or company manager licensed to do business in the Cayman Islands.

An exempted company may issue bearer shares represented by certificates which are transferable by delivery.

However, such company cannot hold land (covers a very wide range of interests in, to or over immovable property, whether direct or indirect) in the Islands. An exempted company, which has never issued bearer shares may hold land, but only if the Financial Secretary, in his discretion, approves it in writing.

Annual Taxation and Fees

There is no form of taxation in the Cayman Islands relating to individuals, corporations or trusts: there are no taxes on income, capital gains, profits, dividends, investments or capital transfers.

The company receives a twenty year guarantee against taxation from the Cayman Islands Government, which may be extend to thirty years on application.

The Cayman Islands have no double taxation treaties with other parts of the world, but have undertaken to assist foreign governments by giving them information if any Cayman Island Company has been involved in activities mutually considered criminal. This Treaty does not cover tax offences, thus no information would be revealed if allegations of tax offences were made.

The licence fees depend on the Company’s share capital.
• For Exempt Companies with a share capital not exceeding US$ 50,000 the fee is US$ 575
• For Exempt Companies with a share capital over US$ 50,000 but not exceeding US$ 1 million, the licence fee is US$ 805
• For Exempt Companies with a share capital over US$ 1 million, but not exceeding US$ 2 million, the licence fee is US$ 1690
• For Exempt Companies with a share capital exceeding US$ 2 million the licence fee is US$ 2400.
There is no requirement for Exempt Companies to file accounts. However, an annual return must be filed.

The return takes the form of a simple declaration.

EditorJurisdiction of the month: Cayman Islands