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Guide to Establishing Private Equity Funds in the Cayman Islands

October 2017 Piers Alexander

There’s a reason that the Cayman Islands is one of the world’s biggest and most attractive hubs for offshore financial businesses. Not only does it provide a stable, tax-neutral platform but also offers a sound legislative and judicial system, confidentiality, a leading banking sector and legal and financial professional and support services.

As issues of high taxation, complex financial laws and economic and political instability continue to affect the onshore world, the attractiveness of the Cayman Islands as a location for establishing private equity funds increases.

To help fund managers decide whether the Cayman Islands is the right home for their fund, we’ve outlined some important factors to consider when setting up a private equity fund, as well as provided an overview of necessary documentation and relevant regulations.

Key Considerations

1. What Fund Structure Should You Use?

While an open-ended fund permits periodic redemptions by the investors and is a good choice for funds with liquid investment strategies (such as hedge funds), a closed-ended structure is suitable for those that require more time for their investments to mature.

In a closed-ended fund, an investor cannot redeem or exit from the fund until it is wound up. A closed-ended fund also only accepts investors for a set period, such that the number of investors is fixed at the closing of the subscription deadline. Because investors want to know how long their capital will be tied up, a closed-ended fund usually has a finite lifespan.

2. The Limited Partnerships

The most popular vehicle for Asian private equity funds is an exempted limited partnership. In the Cayman Islands, the Exempted Limited Partnership Law (“ELPL”) governs the formation of these kinds of partnerships. To be registered under the ELPL, such partnerships must have a general partner and at least one limited partner. An exempted limited partnership does not have a separate legal personality and the general partner is responsible for the management of the partnership business. Contracts and other documents with third parties will therefore be entered into by the general partner on behalf of the partnership.

 

To continue reading full articles in PDF format:
Guide to Establishing Private Equity Funds in the Cayman Islands

 


Piers Alexander
Partner

HONG KONG   +852 2842 9525

Mobile   +852 6469 3375


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Articles

Guide to Establishing Private Equity Funds in the Cayman Islands

02 October 2017 Piers Alexander

There’s a reason that the Cayman Islands is one of the world’s biggest and most attractive hubs for offshore financial businesses. Not only does it provide a stable, tax-neutral platform but also offers a sound legislative and judicial system, confidentiality, a leading banking sector and legal and financial professional and support services.

As issues of high taxation, complex financial laws and economic and political instability continue to affect the onshore world, the attractiveness of the Cayman Islands as a location for establishing private equity funds increases.

To help fund managers decide whether the Cayman Islands is the right home for their fund, we’ve outlined some important factors to consider when setting up a private equity fund, as well as provided an overview of necessary documentation and relevant regulations.

Key Considerations

1. What Fund Structure Should You Use?

While an open-ended fund permits periodic redemptions by the investors and is a good choice for funds with liquid investment strategies (such as hedge funds), a closed-ended structure is suitable for those that require more time for their investments to mature.

In a closed-ended fund, an investor cannot redeem or exit from the fund until it is wound up. A closed-ended fund also only accepts investors for a set period, such that the number of investors is fixed at the closing of the subscription deadline. Because investors want to know how long their capital will be tied up, a closed-ended fund usually has a finite lifespan.

2. The Limited Partnerships

The most popular vehicle for Asian private equity funds is an exempted limited partnership. In the Cayman Islands, the Exempted Limited Partnership Law (“ELPL”) governs the formation of these kinds of partnerships. To be registered under the ELPL, such partnerships must have a general partner and at least one limited partner. An exempted limited partnership does not have a separate legal personality and the general partner is responsible for the management of the partnership business. Contracts and other documents with third parties will therefore be entered into by the general partner on behalf of the partnership.

 

To continue reading full articles in PDF format:
Guide to Establishing Private Equity Funds in the Cayman Islands

 


Piers Alexander
Partner

HONG KONG   +852 2842 9525

Mobile   +852 6469 3375