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Change is afoot: suggestions for legislative reform in the Cayman Islands

December 2017 Robert Lindley

Abstract

Revision and modernization of trust legislation has been a global theme over the past few years, and implementation of this new legislation has been common across a number of jurisdictions: indeed, major common law jurisdictions such as the UK, Singapore, Hong Kong, and New Zealand, as well as offshore jurisdictions such as Bermuda and Jersey, have all explored and in many cases implemented initiatives for improvement and refinement of their own legislation to meet the needs of an evolving industry. The Cayman Islands now looks set to join these ranks, with the local Law Reform Commission issuing a Discussion Paper outlining the key areas of trusts law that it considers need fine-tuning and modernizing in order to meet the needs of the modern trust and trustee. Consultation and debate in the jurisdiction continue, but important changes may well be on the horizon.

The key components of the trust concept are relatively uniform across common law jurisdictions. However, even a cursory comparison between the trusts laws of different countries shows that each jurisdiction has followed its own evolutionary path. Most have adapted and modified their trust law offerings to address issues and complexities peculiar to their domain or, in the alternative, to present an option or solution that seeks to set its own trusts laws apart from others. The Cayman Islands is an excellent example of this, with its legislative regime presently in place offering a variety of innovative structures such as trusts established pursuant to its Special Trusts Alternative Regime Law (‘STAR’)1 and, more recently, foundation companies,2 as well as asset protection tools in the form of its firewall legislation.3

The careful finessing and fine-tuning of the local legislation that has been ongoing since the Trusts Law (most recently revised in 2017) (the ‘Trusts Law’), first introduced in the Cayman Islands in the late 1960s, looks set to continue in the light of a review of local legislation recently commenced by the Cayman Islands Law Reform Commission (the ‘Commission’). In a discussion paper released on 5 April 2017 (the ‘Discussion Paper’),4 the Commission provided local practitioners, industry members and advisors, and the general public with an outline of the possible changes to the Trusts Law to address head-on issues that arise in the modern trusts context. As explained further below, while the possibility of reform actually taking place imminently is still relatively low, the Discussion Paper offers a good insight into why reforms are being considered in the areas identified by the Commission, and how those reforms might impact on settlors, trustees, and beneficiaries of Cayman Islands trusts.

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Robert Lindley
Counsel, Head of Cayman & BVI Private Client & Trust

British Virgin Islands, Cayman Islands   +1 345 814 7360


This article was originally published in Trusts and Trustees, Volume 23, Issue 10, 1 December 2017.

1 As now embedded in pt VII of the Trusts Law.
2 Pursuant to the Foundation Companies Law, 2017; which came into force on 18 October 2017.
3 Found at ss 91–93 of the Trusts Law.
4 Cayman Islands Law Reform Commission, Trusts Law Reform: Discussion Paper (5 April 2017).

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