CAYMAN ISLANDS – Introduces Beneficial Ownership Register

Effective 1 July 2017, the new legislation for Cayman Companies and Cayman Limited Liabilities Companies to create and maintain a register of beneficial ownership (“the Register”) came into force.

The Register will be maintained at the Registered Office and NOT be publicly accessible. The information will only be made available to a specified Cayman Islands competent authority, principally on proper and lawful request made by the UK law enforcement agencies.

The introduction of the new legislation demonstrates the Cayman Islands’ continued commitment to meeting the high standards of due diligence and transparency by the international financial services industry.

Which entities are within scope (“In-Scope Entity”)
Companies which are required to provide this information are companies incorporated or registered by way of continuation under the Companies Law (2016 Revision) and the Limited Liability Companies Law (2016):

  • Ordinary Resident;
  • Non-Resident Companies;
  • Special Economic Zone Companies;
  • Exempted Companies;
  • Exempted duration Limited Duration Companies;
  • Segregated Portfolio Companies;
  • Limited Liability Companies (LLC).

Exemptions Companies or LLCs (or their subsidiaries) which are exempted from keeping the Register are as below:

  • listed on the Cayman Stock Exchange or an approved stock exchange;
  • registered or holding a licence under a regulatory law as defined in s. 2 of the Monetary Authority Law (2016 Revision), which includes regulated funds under the Mutual Funds Law and Excluded Persons under the SIB Law;
  • managed, arranged, administered, operated or promoted by an “approved person” as a special purpose vehicle, private equity fund, collective investment scheme or investment fund;
  • general partners of special purpose vehicles, private equity funds, collective investment schemes or investment funds each of which is managed, arranged, administered, operated or promoted by an approved person; or
  • exempted by the Regulations.

Who are beneficial owners?
A beneficial owner is a person for whose benefit the company was established and who has ultimate control over the company. A beneficial owner can be an individual or a legal entity.

Beneficial owners with respect to a company generally:

  • directly or indirectly holds, in aggregate, more than 25% of the shares or in the case of LLC, interests with a right to share in more than 25% of the capital or profits in the company;
  • directly or indirectly holds, in aggregate, more than 25% of the voting rights of the company;
  • holds the right, directly or indirectly, in aggregate, to appoint or remove the majority of directors or managers (for LLCs);
  • if no individual satisfies any of the conditions in (a) to (c) above, the relevant beneficial owner is the person who has the absolute and unconditional legal right to exercise, or actually exercises, significant influence or control over the In-Scope Entity, other than solely in its capacity as director (or manager in the case of LLCs), professional advisor or professional manager;
  • if no individual meets any of the conditions above, but the trustees of a trust or the members of another legal vehicle that is not a legal person (such as a general partnership) satisfy one of the conditions set out above in relation to an In-Scope Entity in their capacity as trustees or members, then such persons will be beneficial owners for this purposes if such persons have the absolute and unconditional legal right to exercise, or actually exercise, significant influence or control over the activities of that trust or other vehicle, other than solely in the capacity of a director (or manager), professional advisor or professional manager.

If there are no registrable beneficial owners identified, the entity must note on the Register the words “no registrable person identified”.

Required information for the Register
Details of the name, residential address and (if different) address for service of notices, date of birth, identification information from the individual’s passport/driving licence/other government ID, and date on which they became a registrable person are to be included on the register. The register must be updated within one month of any changes.

All registrable beneficial owners are required to provide their particulars to the company for entry into the Register, except where the Competent Authority is satisfied, having considered an undertaking provided by a beneficial owner, that there are special reasons for an exemption from compliance with a notice.

Failure to maintain the Register
For companies incorporated prior to 30 June 2017, the Cayman Islands government has stipulated a grace period of one (1) year to enable existing companies to gather information and create a Register.

If a company fails to maintain the Register or keep it up to date due to the failure of a registrable person to provide particulars, the company must issue a restrictions notice to that person. Penalties on conviction in the form of severe fine or imprisonment may be imposed on the beneficial owners and/or company (which may include director, manager (for an LLC) or other officers) who fail to comply with the requirements.