In February 2020 the EU included the Cayman Islands on its Annex 1 list of non-cooperative jurisdictions for tax purposes; the so-called “black list”. Whilst the Cayman Islands Government had endeavoured to address the EU’s concerns in respect of the regulation of collective investment vehicles through the passing of The Private Funds Law (the “PFL”) and The Mutual Funds (Amendment) Law on 31 January 2020, the laws were only enacted on 7 February.
The EU’s Code of Conduct Group met on 4 February to give guidance to the EU Finance Ministers on the preparation of the black list and advised that the Cayman Islands did not deliver on their commitment on time. Accordingly, it appears that the listing was due to an unfortunate technical timing breach and the Cayman Islands Government has been liaising with EU officials to begin the process of being removed from the black list as soon as possible, which is anticipated to be October 2020.
In a continuation of the effort to take the Cayman Islands off the EU blacklist, the Government introduced recent changes to the Private Funds Law, in the Private Funds (Amendment) Law, 2020 which came into effect on 7 July 2020 (the “Amendment Law”). The Amendment Law both clarifies the position of what can be defined as a private fund for certain types of entities outlined in the previous version of the PFL and extends the scope of the PFL to additional entities. This clarification and extension may have changed the status of a number of entities, including but not limited to certain master funds, certain alternative investment vehicles and funds formed for a single investment.
In order to comply with the PFL, all entities (including those caught by these changes to the definition of a private fund) which qualify as private funds will need to register with Cayman Islands Monetary Authority (CIMA) by 7 August 2020. Very significant work has been on-going all summer with bulk filings occurring, and local industry players are confident that the filings will be made on time.
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The Private Funds Law and the Cayman Islands’ Status with the EU