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The Foundation Companies Law (the “Law”) was passed by the Legislative Assembly in March 2017, and has now been brought fully into effect from 18 October 2017.
As confirmed in our previous update, a foundation company may be established as a new form of Cayman company and will share many of its features with regular exempted Cayman companies, save that it will be prohibited from paying dividends to its members. Foundations will fit seamlessly into Cayman’s legal regime, and offer up an attractive and flexible structuring tool for private clients with offshore interests, regardless of whether they are located in civil law countries or common law jurisdictions. Foundations are also expected to be useful to commercial lawyers in securitization transactions, as an alternative to the traditional special purpose vehicle under a purpose trust.
The Law will allow for the creation of a new form of company, incorporated in the same way as a standard Cayman exempted company, which will be known as a “foundation company” (referred to below simply as a “Cayman Foundation”). Importantly, the Law is not a new stand-alone statute: effectively, it operates as an addition to the Companies Law (2016 Revision), which will apply to all Cayman Foundations with necessary modifications. This means that the structure of a Cayman Foundation will be a familiar one, and all jurisprudence on Cayman companies will, to the extent it is relevant, apply to a Cayman Foundation. The fee payable to the Cayman Registrar of Companies on incorporation (or conversion from an existing company) is CI$500.00 (US$609.75).
The Law is prescriptive as to the incorporation, administration and management of a Cayman Foundation. In establishing one, the drafter may choose to either convert a current Cayman exempted company to a Cayman Foundation, or to create an entirely new Cayman Foundation from scratch. In all cases, it will be a body corporate with separate legal personality and will have the capacity to sue and be sued and to hold property.
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Cayman Islands Foundation Companies Law Now in Force