Cayman Islands Companies and Trusts

General Introductory and Offshore Tax Information

In spite of the challenges confronted with increasing regulatory demands from international agencies and tough economic times, the Cayman Islands continue to strive positively towards the continued development of the offshore sector. Together with tourism, offshore services have been the pillar of the Islands’ economy and ensuring its success is important for maintaining a stable economy and society.

The Cayman Islands offer a variety of risk management alternatives through corporate and legal structures that are specially designed to protect and manage assets. In addition to Cayman Island offshore companies, the insurance and funds sectors are two world leading sectors whose concepts have become almost synonymous with the expression “Cayman” and total around USD800 billion in assets, with more than 10,000 mutual funds are registered in the Cayman Islands. In 2009, a 25% increase over 2008 in licenses issued for captive formations showed the jurisdiction’s appeal for captives despite the credit crunch and lower demand for and supply of insurance. Currently, the total number of captives stands at 780 with a value of USD44.7 billion and premiums adding up to USD7.5 billion.

In December 2009, the Cayman Islands finalized consultations held by the Basel II Working Committee established by the Cayman Islands Bankers Association and Monetary Authority to implement the Pillar 1 of the Basel II Capital Adequacy Framework. This aimed to assess, design guidelines, policies and regulations for credit risk, asset securitization, market risk, constituents of capital and operational risk. In October 2009 (Brazil), at the general meeting organised by the International Association of Insurance Supervisors (IAIS) and the Offshore Group of Insurance Supervisors(OGIS), CIMA was voted chair of the OGIS.

Cayman Island offshore business entities are exempt from all local taxes that are levied in the Cayman Islands. Exemptions are given on withholding tax on dividends and interest earned by offshore companies and their shareholders, income tax, stamp duty, corporate tax, capital gains, estate, gifts, inheritance, transfers and death tax. Exempt trusts are liable to zero tax for a period of fifty years. All Cayman Islands offshore business entities are required to pay the necessary annual maintenance re registration fees.

Cayman Islands Offshore Business Entities:

• Cayman Islands Company
• Cayman Islands Offshore/Exempted Partnerships
• Cayman Islands Offshore/Exempted Trusts
• Cayman Islands Offshore/International Banks
• Cayman Islands Offshore Insurance

Cayman Islands Company

Main Features:

• The Companies Law (2009 Revision) regulates Cayman Island exempted companies
• Cayman Islands exempted companies are not allowed to do business within the Cayman Islands
• This structure may issue shares in bearer form, of no par value or shares may be negotiable
• Cayman Island exempted companies are allowed to maintain register anywhere is the world
• Exempted companies are not subject to public scrutiny at Registry, nor are they subject to filing annual returns
• Cayman Island exempted companies are not obligated to keep shareholders’ general meetings
• Name ending of an exempted company must include the word “Limited” or abbreviation “Ltd.”

Exempted Continued or Redomiciled Company

• A Cayman Island exempted company is one formed in another jurisdiction and relocated to the Cayman Islands

Exempted Segregated Portfolio Company

• This is a Cayman Island company with the capacity to ring fence or segregate its liabilities and assets between segregated cells or portfolios created within an ‘umbrella’ company
• Constitutes is a legal individual entity and is not separate from its segregated portfolio
• Cayman Islands segregated portfolios may be used for captive insurance purposes, umbrella or multi-class mutual funds

Exempted Limited Duration Company

• Cayman Island exempted limited duration companies are exempted companies with a maximum duration of 30 years
• This structure may be treated as a partnership and is subject to a minimum of two (2) members
• The name ending must include the phrase “Limited Duration Company” or abbreviation LDC"

Non —Resident Company

• Contrary to resident companies do not conduct business in the Cayman Islands
• In the event where business is carried on locally, Cayman Island non-resident companies must be principally for the purpose of further carrying out foreign business
• This structure is subject to annual filing of the names of directors, paid-up capital and directors and keeping a registered office within the Cayman Islands

Cayman Islands Offshore/Exempted Partnerships

Exempted Limited Partnerships

• The Exempted Limited Partnership Law (11 of 1991) (1997 Revision) regulates Cayman Islands Partnerships
• Cayman Island exempted limited partnerships may not conduct business within the Cayman Islands
• This Cayman Island offshore business entity may have both general and limited partners and can be structured to have limited liability
• A corporation can be structured as an exempted limited partnership
• This Cayman Island offshore business entity is subject to public scrutiny at local Registry

Ordinary Limited Partnerships

• Cayman Island ordinary limited partnerships are not tax exempt structures
• All partners of this Cayman Island business entity are subject to file and gazette a declaration of names and addresses of all partners, capital amount contributed by all limited partners, the business name, place and nature of business
• Ordinary limited partnerships in the Caymans may be incorporated by minimum of two (2) persons
• This structure is subject to minimum of one (1) general partner
• General partners are liable for all obligations and debts
• Ordinary limited partnerships are subject to minimum of one (1) limited partner
• The liability of limited partners of this Cayman Island business entity does not exceed their capital contribution

Cayman Islands Offshore/Exempted Trusts

Exempted Trusts

• Cayman Island offshore trusts can be take one of three different forms
• Offshore trusts are known as exempt trusts in the Cayman Islands and are legislated under the Trusts Law (1998 Revision)
• This Cayman Island offshore business entity is formed by a written instrument inter vivos or testamentary
• A Cayman Island offshore trust may hold an interest in a partnership, company or other entity which posses land in the Cayman Islands
• Required to file minutes, accounts and other necessary documents with local Registry

(Exempted) Special Trusts (Alternative Regime) (STAR)

• These offshore trusts are formed by a written instrument inter vivos or testamentary
• Allow for the creation of purpose, person, mixed trusts and charitable trusts
• May not have direct or indirect interest in property in the Cayman Islands
• May hold an interest in a partnership, company or other entity which posses land in the Cayman Islands
• Are required to file minutes, accounts and other necessary documents with local Registry

Protective Trusts

• May be formed in name of the principal beneficiary for a period of time ranging from a specific number of years to life
• Trust funds are set to be disbursed upon the termination or occurrence of an event, if the beneficiary undertakes or makes a certain decision or should suffer anything or act

Cayman Islands Offshore/International Banks

Class A

• Cayman Island offshore banks are legislated under the Banks and Trust Companies Law (2003 Revision)
• Class A licenses for this Cayman Island offshore business entity are granted for conducting both offshore banking and domestic retail banking

Class B

• Class B offshore banking licenses in the Cayman Islands are granted for conducting strictly offshore banking.
• This Cayman Island offshore business entity services may not offer be provided to Cayman Island residents

Restricted Class B

• Same as Class B license but sets different capitalization requirement

Cayman Islands Offshore Insurance

Insurance Licenses:

Class A Insurer’s License

• All Cayman Island insurance companies are regulated under the Insurance (1999 Revision)
• Class A licenses allow an external or local insurer to conduct insurance business generally from within or in the Cayman Islands

Restricted Class B Insurer’s License

• This type of license issued to offshore insurance companies allows insurers to carry on only insurance business which must be conducted offshore and with the persons approved by the Authority

Unrestricted Class B Insurer’s License

• Allows exempted insurers to accept only insurance business which is not carried on domestically with its member(s) or persons specifically approved by the Authority

Types of Insurers:

• External insurer : An insurer incorporated neither as an exempted or local company
• Exempted Insurer: Exempted insurer incorporated as an exempted company
• Local insurer: An insurer who is not exempted and registered in the Cayman Islands where it also has its head office
• Cayman Island exempted insurers are constituted through shareholding, an acceptable mutual association or partnership undertaken by one or more members with common goals and interests, profession or trade
• Cayman Island exempted insurers may be either a non-resident company formed under the Companies Law (1998 Revision) or a foreign company incorporated in accordance with Part IX of the Companies Law