The Tax Information Authority (TIA) recently issued further updates on the compliance obligations of Cayman financial institutions. A number of key dates and developments have changed since then, including with regard to TIA registration, the 2017 reportable jurisdictions, liquidation reporting obligations and the phasing out of the UK Crown Dependencies and Overseas Territories International Tax Compliance Regulations.
Following lengthy discussions with the UK authorities, the government recently approved new legislation to introduce beneficial ownership registers for certain Cayman companies and limited liability companies. Companies which are subject to direct or indirect regulatory oversight are likely to be exempt from the requirements. All Cayman companies should now review whether they will be required to maintain a beneficial ownership register.
The 2017 deadlines for notification and reporting obligations under the Common Reporting Standard regulations will be extended by two months. Cayman reporting financial institutions will not have notification or reporting obligations under the UK Crown Dependency and Overseas Territories International Tax Compliance Regulations from 2017 onwards; however, obligations under the US Foreign Account Tax Compliance Act remain unchanged.
Draft legislation was recently published to introduce the limited liability partnership (LLP) as a new partnership vehicle in the Cayman Islands. The bill provides for the formation, registration and operation of an LLP as an entity with limited liability and legal personality separate from its partners. The bill also provides for the conversion of existing Cayman partnerships into LLPs and the continuation of foreign LLPs into the Cayman Islands.
The government recently published draft legislation which, when adopted, will require Cayman companies to maintain beneficial ownership registers and for the information in the registers to be made automatically available to the Cayman Islands competent authority through a centralised beneficial ownership platform. The legislation is now expected to pass through the usual approval process in the Legislative Assembly.
Mergers are a favoured method of takeover or restructuring in the Cayman Islands. The recent Grand Court decision in Integra – discussed in this video – provides much-needed guidance on what considerations should be taken into account in determining fair value, which is likely to provide comfort to parties seeking to explore the Cayman Islands merger framework.
The Cayman Islands' commitment to international transparency standards has been reinforced by its adoption of amended Common Reporting Standards (CRS) regulations. All Cayman financial institutions must review their existing CRS compliance policies and update them to make sure that they have suitable policies and procedures in place, and that they are correctly registered and able to file any nil returns needed in May 2017.
The Trusts (Amendment) Law 2016, which was recently gazetted, has amended and modernised the existing Cayman Islands Trusts Law. Along with provisions addressing certain powers and the appointment and discharge of trustees, the law introduces a number of retrospective provisions, covering trustees, Special Trust Alternative Regime trusts and charitable purposes.
The Cayman Islands government is set to grant the Cayman Islands Monetary Authority (CIMA) new enforcement powers under an amendment to the Monetary Authority Law. If passed in its existing form, the Monetary Authority (Amendment) Bill 2016 will allow CIMA to impose fines for breaches of regulatory laws by licensed or regulated individuals or entities.
The Cayman Islands Court of Appeal recently provided some clarity on the ranking of priority in the liquidation of amounts owing to shareholders and former shareholders of a company operating as an open-ended investment fund. The decision has confirmed that Section 37(7)(a) of the Cayman Islands Companies Law applies where a shareholder has merely accrued the right to redeem his or her shares, but has not yet completed the redemption process prescribed by the company's articles.
The new Confidential Information Disclosure Law modernises the Cayman Islands' approach to confidential information, doing away with the criminal penalties which accompanied its predecessor and bringing the deliberations over breach of confidence into the realm of the rules of equity and common law. The law includes a new exemption through which disclosure of confidential information is permitted, essentially introducing a 'whistleblowing' defence for disclosures made in good faith.
A recent decision by the Supreme Court of New York Appellate Division has affirmed that the law of the Cayman Islands applied on the question of the law applicable to derivative claims brought by a shareholder of a Cayman Islands company in the New York jurisdiction. Any shareholder of a Cayman Islands company that wishes to bring a derivative action must commence the action in the Cayman Islands.
Shareholders in a company that is the subject of a takeover and merger have certain intrinsic rights available to them in the event that they dissent to the merger, most notably a right to have their shares purchased at a 'fair value'. The Cayman courts will approach the issue of fair value on the individual facts; the starting point is a valuation approach on the basis of no discount or premium attributable to the merger itself.
The spotlight of the international community is shining more brightly than ever on international financial centres and those that use them, in an effort to reduce aggressive tax avoidance and tax evasion. To assist global efforts to tackle tax evasion and corruption and to increase transparency, the government has amended the Companies Law and proposed a fundamental overhaul of its confidentiality laws.
A bill was recently published for the creation of a new law permitting formation of the new Cayman limited liability company (LLC) corporate vehicle. The creation of the Cayman LLC is eagerly anticipated by the investment funds industry, as it will provide the market with a corporate vehicle that is closely aligned with the Delaware LLC and is more flexible than the vehicles presently used for structuring purposes.
A widely discussed recent Cayman Grand Court decision declined to follow the precedent set in Re China Milk Products Group Ltd, instead striking out a winding-up petition filed by the directors of China Shanshui Cement Group Limited for lack of standing. The decision re-establishes the principles set out in the English case of Re Emmadart Ltd as good law in the Cayman Islands.
The Companies (Amendment) Law 2015 has come into effect and will have potential application to all Cayman companies. The law amends the sections of the Companies Law (2013 Revision) which deal with notification of appointments and changes of directors. The law now requires companies to notify the Registrar of Companies within 60 days of first appointments and any subsequent changes in the register of directors and officers.
Insolvency law is principally regulated by the Companies Law and the Companies Winding Up Rules 2008, supplemented by a wide body of case law. This update summarises their features, including provisions on insolvency, commencement, appointment of a liquidator, priority, set-off, challengeable transactions, misfeasance, debt restructuring schemes, accreditation and cross-border issues.
The Cayman Islands Court of Appeal recently issued a decision concerning the impact of side letters on the constitutional arrangements of Cayman funds. One of the critical questions raised by the case was whether a side letter was enforceable when made between the investment manager of a fund and an individual institutional investor in that fund, where the investment manager had no actual or ostensible authority to make it.
Developments regarding EU investor access to non-EU alternative investment funds or EU alternative investment funds managed by non-EU managers have been the source of debate, mainly as a result of the EU Alternative Investment Fund Managers Directive. The Cayman Mutual Funds Law and Securities Investment Business Law were recently amended in order to provide for 'opt-in' regimes in relation to the directive.