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The Cayman Islands Private Funds Bill, 2020 – are Fund Finance Deals Impacted?

On January 8, 2020 the Cayman Islands Government published the Private Funds Bill, 2020 (the “Bill”). The Bill builds upon the reputation of the Cayman Islands as a co-operative and transparent jurisdiction and introduces for the first time a requirement for private funds to register with the financial regulator in the Cayman Islands – the Cayman Islands Monetary Authority (“CIMA”).

While the introduction of the Bill is an important step in the evolution of the Cayman Islands as a leading jurisdiction for the formation of private funds vehicles, it will result in significant changes to the supervision, regulation and registration requirements of such vehicles in the Cayman Islands and so is of immediate relevance to sponsors, service providers and lenders to private funds.

What is a Private Fund?

Almost all Cayman Islands fund vehicles that are commonly seen within private equity and venture capital structures will fall within the definition of a “private fund” under the Bill.

Many alternative investment vehicles within such structures will also be caught within the definition of “private fund” and, while they will be required to register with CIMA, such vehicles will be exempted from certain provisions of the Bill (most notably, annual audit).

The Bill applies to each “private fund” which is defined as any company, unit trust or partnership whose principal business is the offering and issuing of its investment interests (which carry an entitlement to participate in the profits or gains of the fund and are not redeemable at the option of the investor), the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and enabling investors to receive profits or gains from such entity’s acquisition, holding, management or disposal of investments; where:

  • the holders of such interests do not have day-to-day control over the acquisition, holding, management or disposal of the investments; and
  • the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly, for reward based on the assets, profits or gains of the private fund.

 

 

To continue reading full articles in PDF format:
The Cayman Islands Private Funds Bill, 2020 – are Fund Finance Deals Impacted?

 


Derek Stenson
Partner

Cayman Islands   +1 345 814 7392


Michael O’Connor
Associate

Cayman Islands   +1 345 814 7395


This article originally appeared in Cadwalader’s Fund Finance Friday newsletter: https://www.cadwalader.com/fund-finance-friday/.

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