Incorporating in the Cayman Islands: exempted companies
The Cayman Islands is a leading jurisdiction for the establishment of structured finance vehicles, private funds and mutual funds and is popular with trust and corporate services. Cayman’s tax-neutral status presents unique opportunities for businesses, while its commitment to continuing to align its regulatory framework with international standards has increased its investor appeal. Cayman has no corporation tax and no wealth, capital gains or estate tax for entities, making it an attractive location to establish entities and structures.
The Cayman Islands ranks as the least complex jurisdiction in which to do business in TMF Group’s Global Business Complexity Index 2024 report. Despite this, companies looking to expand their operations into Cayman often struggle with a lack of understanding of local regulations.
While these regulations are not complex, they are numerous, and this can be overwhelming for newcomers. With knowledgeable and professional talent in our TMF Cayman Islands office, we can help you effectively navigate the regulatory and compliance landscape.
Incorporating a company in the Cayman Islands is quick and straightforward, but certain considerations must be taken into account before and during the process.
Before incorporating in the Cayman Islands
The Know Your Client (KYC) requirements in the Cayman Islands are in line with the Financial Action Task Force (FATF) international standards and require KYC checks to disclose the proposed activities of the company and the actors involved.
Certain basic information must be provided, such as the company’s proposed directors, officers, shareholders and beneficial owners, and due diligence documents including proof of identity, proof of residential address, sources of funds and the source of wealth must be collected. In addition, application and due diligence questionnaires are required.
Once all the necessary documents and supporting questionnaires have been submitted, reviewed and approved, the incorporation process can commence.
Cayman Islands company formation: four key considerations
There are several types of companies in the Cayman Islands, the most common being the exempted limited company, which is required when business activities are conducted primarily outside of the jurisdiction.
These are the four key considerations for organisations setting up an exempted limited company in Cayman:
1. Registered office
A Cayman Islands exempted company must have a registered office in Cayman provided by a licenced service provider. The company may change its registered office to another address in the jurisdiction through a directors’ resolution. The company must file a certified copy of the resolution authorising the change with the Registrar of Companies within 30 days from the date of the resolution together with the prescribed amendment fee.
2. Directors and shareholders
An exempted company must have at least one director or shareholder who need not be resident in the Cayman Islands. The subscriber(s) to the Memorandum of Association will appoint the first director(s). The subsequent appointment and/or removal of directors must be implemented according to the provisions of the Articles of Association. The board of directors is responsible for the management of the exempted company. Board members exercise their power to dismiss and/or appoint the directors as per the Articles of Association.
The Registrar must be notified of any appointments, resignations and/or removals of directors and officers within 30 days from the date of change.
With the corporate governance terrain gaining greater prominence on the global stage, directors must now adhere to higher standards. Having independent professional Cayman resident directors with specialised knowledge is not only valuable but key in ensuring Cayman companies adhere to corporate governance rules, especially for regulated companies.
3. Incorporation procedures
The nature of business of an exempted company must be described in two documents, the Memorandum of Association and the Articles of Association. The business activities may be unrestricted or limited to specific activities as outlined in these documents.
The following documents are to be submitted to the Registrar upon incorporation:
- Memorandum and Articles of Association signed by the subscriber
- Section 165 declaration made by the subscriber that the operation of the proposed exempted company will be conducted mainly outside the Cayman Islands
- Appropriate incorporation fee
Once the documents have been filed and the fee is paid, the Registrar will issue a certificate of incorporation.
Approval is usually granted by the registrar within five to seven working days, but there is an express service available for an additional fee where approval is issued within 24 hours.
4. Economic substance
Economic substance (ES) requirements were introduced in the Cayman Islands in 2019 for certain geographically mobile activities. This legislation was introduced as part of the Cayman Islands’ commitment to the Financial Action Task Force (FATF) on the international standard for anti-money laundering.
Companies are required to file an ES notification in January each year. This is a prerequisite for filing the annual return.
All legal entities domiciled or registered in the Cayman Islands must file this annual notification declaring whether they were in scope in the preceding year and whether they were involved with any relevant activities.
Exempted companies involved in relevant activities that are also tax resident outside the Cayman Islands must provide additional information to comply with the ES requirements for each relevant activity. These activities include:
- Banking
- Distribution and service centres
- Finance and leasing
- Fund management
- Headquarters
- Holding
- Insurance
- Intellectual property business
- Shipping
Talk to us
With our local experts on the ground, TMF Cayman Islands provides full administrative support for your prospective or existing operations in Cayman, from entity incorporation to local directorship services, payroll and (fund) accounting and tax services. We assist both local and global companies looking to do business in the Cayman Islands.
To learn more about how we can help you navigate the expansion journey and unlock opportunities for growth, contact us today.
