A Q&A guide to establishing a business in the Cayman Islands.
This Q&A gives an overview of the key issues in establishing a business in the Cayman Islands, including an introduction to the legal system; the available business vehicles and their applicable formalities; corporate governance structures and requirements; foreign investment incentives and restrictions; currency regulations; and tax and employment issues.
1. What is the legal system in your jurisdiction based on (for example, civil law, common law or a mixture of both)?
The legal system in the Cayman Islands (Cayman) is a mixture of common law, locally enacted statutes and UK orders in council. With respect to common law, as a British Overseas Territory, Cayman treats judicial decisions made in the UK and other Commonwealth jurisdictions as persuasive in nature.
2. What are the main forms of business vehicle used in your jurisdiction? What are the advantages and disadvantages of each vehicle?
The main forms of business vehicle include:
- Exempted companies incorporated with liability limited by shares or guarantee or with unlimited liability (see Question 8).
- Limited liability companies (a hybrid between an exempted company and an exempted limited partnership)
- Partnerships (particularly exempted limited partnerships as described in further detail in Question 5).
- Trusts (see Question 7).
- Segregated portfolio companies (a single legal entity whose assets and liabilities can be allocated to different segregated portfolios within the company, so of particular use in insurance, mutual fund and securitisation structures).
- Special economic zone companies (available to those operating in certain sectors (for example, commodities)), which can take advantage of expedited incorporation and immigration procedures.
- Local ordinary companies (for those wishing to undertake business in Cayman).
Establishing a presence from abroad
3. What are the most common options for foreign companies establishing a business presence in your jurisdiction?
The Companies Law (Revised) (Companies Law) distinguishes between local ordinary companies, which are generally required to be majority owned by Caymanians, and exempted companies, which are not. Only local companies can carry on and compete for business within Cayman. Exempted companies, while resident in Cayman, cannot carry on their business activities in Cayman, except in furtherance of their business outside Cayman. In relatively rare circumstances, an exempted company can obtain a licence to carry on limited business activities in Cayman.
Typically, foreign investors or companies will look to establish a presence in Cayman but undertake business external to Cayman, so will incorporate an exempted company with limited liability in Cayman.
Exempted companies can be incorporated within 24 hours of the relevant documentation being filed and provide great flexibility to investors. For example, directors and officers are not required to be resident in Cayman, the register of members and minute books can be held in another jurisdiction and annual general meetings of members are not required.
Further, the incorporation process is easy to navigate and incorporation fees are relatively low.
4. How can an overseas company trade directly in your jurisdiction?
An overseas company that establishes a place of business or commences carrying on business within Cayman, must register with the Registrar of Companies (Registrar) as a foreign company under Part IX of the Companies Law.
As part of this registration process, the following documentation must be filed with the Registrar:
- A certified copy of the company’s constitutional documents.
- The certificate of incorporation or other instrument constituting or defining the constitution of the foreign company.
- The name and address of each director of the company.
- The names and addresses of one or more persons resident in Cayman who are authorised to accept service of process and any notice on behalf of the company.
Overseas companies commonly register as a foreign company in Cayman to:
- Act as a general partner of a Cayman Islands exempted limited partnership.
- Carry out securities investment business in the Cayman Islands.
- Act as a branch operation in accordance with the insurance, bank and trust laws of Cayman.
- Act as a mutual fund administrator.
- Hold land in the Cayman Islands.
This article was first published in Thomson Reuters Practical Law.