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:

Stock Exchange or another approved stock exchange;

a regulatory law of the Cayman Islands (e.g., an investment fund registered

under the Mutual Funds Law (2015 Revision));

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);

fund or scheme referred to in paragraph (iii) that is managed, arranged,

administered, operated or promoted by an approved person; or

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:

indirectly, more than 25% of the shares or interests in the Relevant Company;

indirectly, more than 25% of the voting rights in the Relevant Company;

indirectly, to appoint or remove a

majority of the board of directors or manager of the Relevant Company;

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

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:

address for service or notices or registered/principal office address for a

legal entity;

passport or other government ID or corporate documents in respect of a legal

entity; and

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

[email protected]

Aaron Walker

Senior Associate

Tel:(+1 345) 814 7931

[email protected]