Corporate and commercial

The Income Tax (Substance Requirements)(Implementation) Regulations, 2018 as amended (the Substance Regulations) came into force on 1 January 2019 and have recently been further updated by The Income Tax (Substance Requirements)(Implementation)(Amendment) Regulations, 2019 (the Amendment Regulations), with effect from 1 August 2019.  The Amendment Regulations have extended the scope of the Substance Regulations to include all tax exempt bodies that have been granted an exemption under paragraphs (3) and (5) of Schedule 1 of the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 (as amended) (the Exempt Bodies Ordinance).  In addition, the Amendment Regulations clarify the scope of the Substance Regulations in relation to IP Assets and High Risk IP Companies – the balance of this note focuses on the change in status of tax exempt bodies.  Prior to the Amendment Regulations coming into force, all Guernsey companies that were tax exempt bodies were out of scope of the Substance Regulations since they were not treated as tax resident in Guernsey for the purposes of the Income Tax (Guernsey) Law, 1975 (as amended) (the Income Tax Law). Under the Amendment Regulations the scope of the Substance Regulations has been extended to Guernsey companies which have been granted a tax exemption by the Director of the Revenue Service other than those which qualify for the tax exemption by virtue of being a collective investment scheme, notwithstanding that they continue to be tax exempt bodies. The Amendment Regulations expressly do not bring collective investment schemes falling to be exempt under paragraphs (1), (2) and (4) of the Exempt Bodies Ordinance into scope of the Substance Regulations. This means that companies that have obtained tax exempt status by virtue of satisfying one or more of the following criteria are now no longer automatically out of scope of the Substance Regulations: the management of a specific collective investment vehicle; enabling investment into a specific collective investment vehicle; the acquisition or the management of the assets of a specific collective investment vehicle; facilitating the funding of, or borrowing by, a specific collective investment vehicle for the acquisition of its assets; or being a company which is in the beneficial ownership of or wholly owned (i) by a collective investment scheme exempted under paragraphs (1), (2) or (4) of the Exempt Bodies Ordinance or (ii) by a body described in the previous 4 bullet points. It should be noted by way of examples, that: (i) Guernsey companies that are managing a collective investment vehicle or its assets and, as a result of this, had obtained tax exempt status will now be in scope of the Substance Regulations and be required to comply with the provisions relating to the relevant activity of fund management; similarly, (ii) Guernsey companies that make loans to collective investment vehicles for the purpose of enabling the collective investment vehicle to acquire assets, or are subsidiaries of a collective investment vehicle or other body established for the purposes of undertaking collective investment and make loans to entities invested in by that scheme and have obtained tax exempt status as a result would fall into scope of the Substance Regulations and be required to comply with the provisions relating to the relevant activity of finance and leasing, in each case notwithstanding they continue to be tax exempt bodies for the purposes of the Income Tax Law; and (iii) Guernsey companies that are not exempt under paragraphs (1), (2) or (4) of the Exempt Bodies Ordinance that hold controlling interests in subsidiary companies would be required to comply with the Substance Regulations as they relate to pure equity holding companies. Given this extension to the scope of the Substance Regulations, all companies that are tax exempt bodies that have already received economic substance advice should re-examine their business model to evaluate whether their activities require them to demonstrate economic substance in Guernsey to the Director of Revenue Services in accordance with the requirements of the Substance Regulations, noting that collective investment schemes expressly remain out of scope of the Substance Regulations, whether or not they have obtained a tax exemption from the Director of Revenue Services under the Exempt Bodies Ordinance. Action Points Guernsey companies that are tax exempt bodies, other than those that are collective investment schemes, should consider whether their activities bring them into scope of the Substance Regulations and, if so, whether their operations satisfy the relevant obligations under the Substance Regulations. Companies that are collective investment schemes have not been brought into scope of the Substance Regulations by virtue of the Amendment Regulations and so continue to be out of scope of the Substance Regulations. Given the applicable regulatory regime in Guernsey, it is anticipated that many structures will be compliant with the new requirements already – consideration, however, should still be given to whether amendments and updates are required to contracts, policies and procedures, outsourcing arrangements, offering memoranda and board resolutions and procedures as a result of the Substance Regulations. We are already assisting many clients to scope their activities and report on their compliance with the Substance Regulations. You should get in touch with your usual Ogier contact as soon as possible should you require further information or advice on the Substance Regulations and the implications for your business.

The Cayman Islands Government has passed a number of amendment laws to strengthen Cayman's anti-money laundering and counter-financing of terrorism regime. The laws, published on 8 August 2019, are intended to help address certain recommended actions in Cayman's legislative framework identified by the Caribbean Financial Action Task Force in its evaluation report published in March 2019. The Companies (Amendment) Law, 2019, the Limited Liability Companies (Amendment) Law, 2019 and the Limited Liability Partnerships Law (Amendment) Law, 2019 each amend their respective principal laws to enact changes to the filing, maintenance and availability of information in respect of such Cayman entities. Similar amendments apply for each type of entity but the following is a summary of the amendments as they relate to Cayman companies: (a) commencing 7 November 2019 (for companies incorporated after 8 August 2019) and 7 February 2020 (for companies incorporated on or prior to 8 August 2019), voting rights in respect of each shareholder must be recorded in the register of members of the company; (b) with immediate effect, the period for filing changes to the register of directors of the company with the Registrar has been reduced from 60 days to 30 days; (c) the penalties for failure to establish or maintain a beneficial ownership register have been increased to CI $25,000 (US $31,000) for a first offence, CI $100,000 (US $122,000) for a second offence and ability for strike off by direction of the court for a third offence. Failure to comply with any notice or to provide information under the beneficial ownership legislation will, on conviction, incur a fine of CI $25,000 (US $31,000) for a first offence and CIS$50,000/ US $61,000 (or two years' imprisonment) for a second or subsequent offence; and (d) the Cayman Islands Registrar of Companies (Registrar) shall be obliged to provide information to other regulatory bodies such as the Anti-Corruption Commission, Cayman Islands Monetary Authority, Financial Crimes Unit of the Royal Cayman Islands Police Service, Financial Reporting Authority, Tax Information Authority and any other competent authority (Regulatory Authorities) upon request from such regulatory body. Similar changes to Cayman trusts have been introduced by the Trusts (Amendment) (No. 2) Law, 2019 that requires trustees, wherever based, of Cayman Islands law governed trusts to keep and maintain accurate and up to date records in relation to settlors, contributories, beneficiaries, protectors, enforcers, service providers and controlling persons as well as accounting records. It also requires the Registrar of Trusts, trustees, and other persons who exercise ultimate effective control of trusts, to share information on registered trusts with Regulatory Authorities and provides for sanctions to be imposed for failure to provide such Regulatory Authorities with required information in a similar fashion to the Registrar, as set out above in respect of companies. With effect from 1 October 2019, an additional amendment of significance contained within the Companies (Amendment) Law, 2019 will require the names of the current directors and alternate directors of all Cayman companies to be publicly available from the Registrar on the payment of a fee of CI $50 (US $61). The information available is limited to the names of the current directors and alternates and does not include any other personal details such as address, date of birth or nationality. A search may be conducted in relation to a specific company only and may only be made in person at the offices of the Registrar. The same requirement has been made in respect of managers of limited liability companies under the Limited Liability Companies (Amendment) Law, 2019. In terms of required actions - clients are advised to: contact their registered office provider to ensure that the register of shareholders will be updated with the relevant shareholder voting information by the required deadline; in the case of investment funds, contact their fund administrators to ensure that the register of shareholders of their respective funds will be updated with the relevant shareholder voting information by the required deadline; and take the opportunity to verify the information contained in the register of directors or, in the case of limited liability companies, managers held at the registered office filed with the Registrar. Please contact your usual Ogier attorney or any of the contacts listed here for further information or advice in relation to any of the above changes.

As of 1 March 2019, the Luxembourg law of 13 January 2019 (the Law) creating a register of beneficial owners (Registre des bénéficiaires effectifs or "RBE") is in force. The Law has established a central register of beneficial owners, managed by the Luxembourg Business Registers (the LBR), in order to safe-keep and make available to the authorities and (with certain restrictions) to the public, relevant information on the beneficial owner(s) of Luxembourg entities. Technical aspects of the functioning of the RBE, such as the submission procedure, tariffs, supporting documents etc have been detailed by a Grand-ducal Regulation and further elaborated by a circular letter issued by the LBR. Entities in scope of the Law The Law applies to all entities registered with the Luxembourg Trade and Company Register (RCS) whatever their legal form (the Registered Entities). Main requirements of the Law Main requirements of the Law laid upon Registered Entities are to: submit to the RBE the following personal information: (i) name(s)/last name of the beneficial owner, (ii) nationality, (iii) date/place of birth, (iv) country of residence, (v) precise private or professional address, (vi) national or foreign identification number (if applicable) and (vii) nature and extent of the beneficial interest held; obtain and maintain adequate, accurate and up-to-date information, along with supporting documentation, on their beneficial owner(s) at their registered office; file such information and supporting documentation in the RBE within a month after the Registered Entity becomes aware or should have become aware of the event requiring the registration or modification of the information; and forward such information to competent national authorities (upon simple request) and to certain professional entities (upon a substantiated request). Main requirement laid upon the beneficial owner itself is to provide to the Registered Entity any information necessary for the entity to comply with its obligations under the Law. By way of derogation, it should be noted that Registered Entities whose securities are admitted to trading on a regulated market in Luxembourg, an EEA country or a third country which imposes transparency obligations equivalent to those established by the Directive 2004/109/EC[1] only have to provide the name of the market in question. Who are the beneficial owners A beneficial owner is defined by the Law of 12 November 2004 on the fight against money laundering and terrorist financing as any natural person who ultimately owns or controls a legal entity, or any natural person(s) on whose behalf a transaction or activity is being conducted. For corporate entities, the notion of beneficial owner includes at least "natural persons who ultimately own or control the entity through direct or indirect ownership of a sufficient percentage of shares or voting rights or ownership interest in that entity, or through control via other means." Holding of 25 % plus one share or more than 25% of an ownership interest shall be an indication of direct ownership, while the indirect ownership is observed in relation to the same threshold, only through a prism of holdings (holding by a corporate entity, which is under the control of a natural person(s), or by multiple corporate entities, which are under the control of the same natural person(s)). If it is not possible to identify the beneficial owner(s) using these methods and provided there are no grounds for suspicion, senior managers ("dirigeants principaux")/members of the governing body of the Registered Entity will be considered as such (and their personal information will then be disclosed to the RBE). In the case of fiduciary arrangements and trusts, the notion of beneficial owners may include the settlor, any fiduciaire or trustee, any protector, beneficiaries or their class, any other natural person exercising ultimate control over the fiducie or trust by means of direct or indirect ownership or by other means, or any natural person holding equivalent or similar positions to that of senior managers. Who may access the RBE? Full access to the RBE is granted to competent national authorities. The public can also access the RBE, save for the private or professional address and the relevant national identification number of the beneficial owners. A limitation of access to public information may be granted in exceptional circumstances (eg risk of fraud, kidnapping, blackmail, extortion, juvenile or legally disabled beneficial owner, etc). and upon a specific substantiated request submitted to the LBR in order to prevent public disclosure for a 3-year period (maximum), renewable if necessary. What are the sanctions for non-compliance The Law lays down criminal fines from EUR 1,250 to EUR 1,250,000. Those sanctions may be applied both towards the Registered Entity and the beneficial owner. When does the information need to be filed in the RBE? A six-month transitional period has been provided, starting from the date of entry into force of the Law until 30 November 2019, to comply with the provisions of the Law and make the required filings to the RBE. During such period, Registered Entities are exempt from all registration fees with the RBE. [1] Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC