Anti-Money Laundering | Beneficial Ownership | CIMA | Offshore Funds | Private Investment Funds | Regulatory Filings
Cayman Islands Requires Companies to Maintain Beneficial Ownership Register; Is Your Fund In or Out (of Scope)?
As of July 1, 2018, companies and limited liability companies incorporated or registered in the Cayman Islands are required to maintain a beneficial ownership register at their Cayman Islands-registered offices (or appointed service provider), unless an exemption applies. Hedge funds and private investment companies registered as companies or limited liability companies in the Cayman Islands should check with their Cayman service providers to confirm whether they comply.
Generally, hedge funds regulated or licensed with the Cayman Islands Monetary Authority (“CIMA”), and hedge funds and private equity funds managed or administered by a person (or a subsidiary of a person) who is regulated or listed in Cayman or an approved jurisdiction, are exempt from this requirement. Approved jurisdictions include Canada, Hong Kong, Ireland, the United Kingdom and the United States.
The Cayman Islands government passed two laws outlining this new beneficial ownership regime, The Beneficial Ownership (Companies) (Amendment) Regulations, 2018, and The Beneficial Ownership (Limited Liability Companies) (Amendment) Regulations, 2018 (the “‘Amending Laws”). These new laws require companies and limited liability companies (“companies”) to maintain a beneficial ownership register unless an exemption applies. The register must include details of the individuals who ultimately own or control more than 25% of the equity interests, voting rights, or have rights to appoint or remove a majority of the company directors, or LLC managers, together with details of certain intermediate holding companies through which such interests are held. The new requirements are aimed at identifying beneficial owners exercising control over the companies within the scope of the regulation, not all beneficial owners.
The Amending Laws require companies that are “in scope” to complete and maintain a beneficial ownership register at their Cayman Islands-registered office (or an appointed Corporate Services Provider, a “CSP”). The registered office or CSP must provide access to information in the register through a search platform established by the competent authority. The register will not be public. The information will only be accessible by a specified Cayman Islands competent authority, based on a lawful request made by United Kingdom enforcement agencies. Companies that are exempt, or “out of scope,” are required to maintain a record with their corporate services provider stating the reasons they qualify for an exemption.
As a practical matter, this information required for the register is standard “know your customer” information for both individuals and entities, including details such as name, address, date of birth and a passport or other identifying document details (or relevant corporate identifying information for a relevant legal entity).
“Out of scope” companies include those that are listed or subject to direct or indirect regulatory oversight and include:
- Companies listed on the Cayman Islands Stock Exchange or approved stock exchange;
- Companies registered or licensed under one of the Cayman Islands regulatory laws (g., a hedge fund registered under the Mutual Funds Law (2015 Revision) or a management vehicle registered or licensed under the Securities Investment Business Law (2015 Revision);
- Firms managed, arranged, administered, operated or promoted by an approved person 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;
- Firms regulated in a jurisdiction deemed to have an equivalent Anti-Money Laundering framework to the Cayman Islands the Anti-Money Laundering Steering Group;
- A general partner of a vehicle or fund referred to in paragraph (c) which vehicle or fund that is registered or holds a license under a regulatory law; or is managed, arranged, administered, operated or promoted by an approved person; or
- Firms holding directly a legal or beneficial interest in the shares of a legal entity which holds a license under the Banks and Trust Companies Law (2018 Revision), the Companies Management Law (2018 Revision), the Insurance Law (2010 Revision), Part III of the Mutual Funds Law (2015 Revision) or the Securities Investment Business Law (2015 Revision) (“SIBL”).
There are penalties for failure to comply. “In scope” companies that fail to maintain the beneficial ownership register can face fines of up to CI$25,000 (US$30,487.80), plus CI$500 (US$609.76) for each day during which the offense continues, up to a maximum of CI$25,000 (US$30,487.80), under Section 274 of the Companies Law.
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