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The Limited Liability Companies Law, 2016 (the “LLC Law”) was published in the Cayman Islands on 8 June 2016. This paves the way for the introduction of a new type of corporate vehicle in the Cayman Islands: the Limited Liability Company (the “Cayman LLC”).
Reporter Steve Hall spoke with Richard Fear, a partner based in the Cayman Islands office of Conyers Dill & Pearman, about the implications of the new law and what investors need to know about the opportunity.
The LLC Law will be brought into force by way of a separate commencement order, which is expected to be published around the end of June 2016.
The Cayman LLC will be a hybrid corporate vehicle combining many of the key characteristics of existing Cayman Islands companies and limited partnerships. The Cayman LLC will provide for the liability of its members to be limited to the amount they have agreed to contribute without any requirement for share capital or the relative structural rigidity of a traditional company and, unlike a limited partnership, will be a body corporate with separate legal personality. In common with limited partnerships, the interest of members in a Cayman LLC will typically be determined by reference to their capital contributions rather than by the number of shares that they hold and that the members will be free to agree amongst themselves how the entity will be operated and regulated (subject to a small number of mandatory rules).
Other features of the Cayman LLC include management by members or third party managers (rather than by directors or general partners), freedom to allocate profits and losses as the members may determine and the duty of managers to be limited to good faith (unless otherwise agreed). The law implementing the Cayman LLC will also allow for the conversion of existing exempted companies into Cayman LLCs, the merger or consolidation of Cayman LLCs with exempted companies or foreign entities with separate legal personality and the continuation by foreign entities with separate legal personality into the Cayman Islands as Cayman LLCs.
To continue reading full articles in PDF format:
Cayman Islands: Get Ready for the LLC Law
This article was originally published in American Lawyer, July 2016.