Stuarts Humphries | View firm profile
The Cayman Islands government has now introduced
legislative changes which will require relevant companies (“Relevant Companies”) to prepare and
maintain a register of beneficial owners (the “Register of Beneficial Owners”).
This
important development is further evidence of Cayman’s progressive and
proportionate approach to transparency whilst protecting the fundamental
principle of confidentiality in legitimate business and personal dealings. The
development of the new beneficial ownership regime is borne out of requests
from the UK government that the Crown Dependencies and British Overseas
Territories each develop and provide a central public register of beneficial
ownership. Cayman has instead agreed a proportionate comprise – and enhancement
of its existing regime concerning the collection of beneficial ownership
information.
Under
the new legislation a Relevant Company is required to prepare and maintain a
Register of Beneficial Owners. This information will then be accessible by the
appointed competent authority of the Cayman Islands and available for automatic
exchange with, and only in the event of a legitimate and lawful request from,
the relevant law enforcement or tax authority in the Cayman Islands or the UK.
Currently, the new regime only provides for the mutual exchange of beneficial
ownership information with the UK but there is scope for this to be expanded if
and when agreements are reached with other countries. The purpose of this
development is to provide a mechanism for the appropriate authorities to easily
identify the ultimate beneficial owners of a company to aid with cross-border
investigations.
Relevant Companies: who must comply?
All
companies (including limited liability companies (LLCs)) incorporated in (or
registered by way of continuation in) the Cayman Islands must comply with the
requirement to maintain a Register of Beneficial Owners unless they are a
company or subsidiary of a company which is:
- listed on the Cayman Islands
Stock Exchange or another approved stock exchange; - registered or licensed under
a regulatory law of the Cayman Islands (e.g., an investment fund registered
under the Mutual Funds Law (2015 Revision)); - managed, arranged, administered,
operated or promoted by an approved
person as a special purpose vehicle, private equity fund, collective
investment scheme or investment fund (and an “approved person” means: a person
that is (a) regulated or licensed under a Cayman Islands regulatory law or
regulated in a jurisdiction listed in Schedule 3 of the Money Laundering
Regulations (2015 Revision) (e.g., an investment manager regulated by the SEC)
or (b) listed on the Cayman Islands Stock Exchange or another approved stock
exchange); - a general partner of a vehicle,
fund or scheme referred to in paragraph (iii) that is managed, arranged,
administered, operated or promoted by an approved person; or - exempted by the relevant regulations
bringing the new regime into force.
What
are the obligations on a Relevant Company?
A Relevant Company
must establish and maintain an electronic Register of Beneficial Owners at its
registered office in the Cayman Islands. The Relevant Company is obliged to
take “reasonable steps” to identify all persons who qualify as a “beneficial
owner” under the legislation (a “Beneficial
Owner”) and collect certain prescribed details to be maintained on the
register.
Relevant
Companies are required to notify in writing (a “Notice”) any person (an individual or “relevant legal entity” –
being a legal entity registered in the Cayman Islands which would be a
registrable Beneficial Owner if it were an individual (a “Relevant Legal Entity”)) it knows or has reasonable cause to
believe is a registrable Beneficial Owner and such persons are under an
obligation to respond to such Notice within one month of receipt, or face
possible criminal penalties, and confirm or correct the details therein.
A
Relevant Company may also send a Notice to a registered shareholder or legal
entity that the Relevant Company knows or has reasonable cause to believe is a
Relevant Legal Entity, if the Relevant Company knows or has reasonable cause to
believe that such shareholder or legal entity knows the identity of a registrable
Beneficial Owner.
Upon obtaining such
information requested per the Notice, a Relevant Company must provide the
prescribed details to its registered office service provider in the Cayman
Islands in order for the Register of Beneficial Owners to be prepared/updated.
In addition, a Beneficial Owner who knows that they have not been added to the
Register of Beneficial Owners, or that their details are no longer up to date,
is under an obligation to notify the Relevant Company of such fact(s) within
one month of becoming aware. Failure to do so may lead to imprisonment or
fines, or both.
Who
is a registrable Beneficial Owner?
A
Beneficial Owner of a Relevant Company is a person who:
- holds, directly or
indirectly, more than 25% of the shares or interests in the Relevant Company; - holds, directly or
indirectly, more than 25% of the voting rights in the Relevant Company; - holds the right, directly or
indirectly, to appoint or remove a
majority of the board of directors or manager of the Relevant Company; - if no individual satisfies
1-3 above, has the absolute and unconditional legal right to exercise, or
actually exercises, significant influence or control over the Relevant Company
(other than solely in the capacity of a director, professional advisor or
professional manager); and/or - has the absolute and
unconditional right to exercise, or actually exercises, significant influence
or control over a trust or other entity (which is not a legal person) owned by
the Relevant Company, other than in the capacity of a director, professional
advisor or professional manager.
A Relevant Company
must also register the particulars of a Relevant Legal Entity that: (i) holds
an interest in the Relevant Company or meets one or more of the specified
conditions directly in respect of that Relevant Company; and (ii) through which
any beneficial owner or Relevant Legal Entity indirectly owns an interest in
the Relevant Company.
The
Register of Beneficial Owners
The
Register of Beneficial Owners should record the following details in relation
to the Beneficial Owners:
- name;
- date of birth;
- residential address or
address for service or notices or registered/principal office address for a
legal entity; - certified copy of their
passport or other government ID or corporate documents in respect of a legal
entity; and - the date on which the person
became or ceased to be a Beneficial Owner.
A
Relevant Company shall not enter any information in the Register unless it has
been confirmed, or the Relevant Company has reasonable grounds to believe it
was supplied or confirmed, by the Beneficial Owner or Relevant Legal Entity to
whom the information relates. The Relevant Company is entitled to rely on the
information provided in response to a Notice without further enquiry unless the
Relevant Company has reason to believe that the response is misleading or
false.
What
action should be taken?
The
beneficial ownership regime is expected to come into force by 30 June 2017,
though there will be a transition period of one year to allow Relevant
Companies to undertake the necessary due diligence and set up their Register.
During the transition period Relevant Companies will not be prosecuted for
failing to comply with the requirements of the new regime.
We will be liaising with our clients to review
their Cayman Islands entities in order to determine their status as Relevant
Companies or not. All Cayman Islands companies should document their
determination as to their status under the beneficial ownership regime and we
can assist with the documentation and processes for undertaking such
determination and establishing the Register of Beneficial Owners where
required.
Read the Beneficial Ownership Legal Update PDF.
This publication is for general guidance and is not intended to be a substitute for specific legal advice. Advice should be sought about specific circumstances.
If you would like further information please contact:
Chris Humphries
Managing Director
Tel:(+1 345) 814 7911
chris.humphries@stuartslaw.com
Aaron Walker
Senior Associate
Tel:(+1 345) 814 7931
aaron.walker@stuartslaw.com