Offshore structured finance transactions depend upon the integrity of the legal arrangements by which a special purpose vehicle ("SPV") is constituted to enter into various obligations. Where an offshore company is used, the aim is to ensure that the separate legal personality of the company is maintained, and the company is not consolidated upon the issuer's balance sheet. Under Cayman Islands law the corporate integrity of an SPV depends in part upon the observance of corporate formalities and professional standards by the directors. It also requires the directors to have a thorough business understanding of the transaction in which the SPV is involved.
The observance of corporate formalities is essential if the arrangements are to be upheld in a court of law. Corporate formalities cover everything from the holding of proper board meetings to observing restrictions in organisational documents. This holds true under Cayman Islands law and may also apply under the law of the
