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As a leading offshore financial centre, the Cayman Islands strives both to meet the varied and changing needs of those who utilise the jurisdiction as well as ensuring it maintains appropriate levels of regulation.
Notable legislation which has come into effect during 2017 has included the Limited Liability Partnership Law, which allows for the registration of a new type of partnership vehicle (the “LLP”); the Non-Profit Organisations Law which formally governs the formal registration and record-keeping in respect of non-profit organisations (“NPOs”); requirements for certain Cayman Islands corporate entities to maintain beneficial ownership registers for very limited purposes (the “Beneficial Ownership Regime”); and legislation aimed at modernizing Cayman’s intellectual property regime, including the Patents and Trade Marks (Amendment) Law, the Trade Marks Law and the Design Rights Registration Law. Further information is provided below.
An LLP is similar to a general or exempted limited partnership, with the key difference that an LLP is established as an entity with legal personality that is separate and distinct from its partners. Accordingly, it is the LLP rather than the individual partners that will be liable for any debts or losses of the LLP. Whilst partners may actively manage the operation of the LLP’s business, they will not be personally liable either jointly and/or severally, provided that such debts or losses are not caused by a negligent act or a breach of duty of care (where such an express duty has been assumed). Whilst LLPs may be used for any lawful purpose, it is expected that they will be of most interest to professional businesses such as accounting or law firms. Existing general partnerships can be converted into LLPs and foreign LLPs may be continued into Cayman.
This law is part of Cayman’s ongoing commitment to increased transparency and the global fight against corruption, money laundering and terrorism. It provides for the establishment of a registration system to deal with the regulation and monitoring of NPOs operating in Cayman and to provide for the investigation into the operations of funds flowing through those NPOs.
The definition of NPO is broad and includes a company or body of persons, whether incorporated or unincorporated or a trust established primarily for the promotion of charitable, philanthropic, religious, cultural, educational, social or fraternal purposes or other activities or programmes for the public benefit or a section of the public within Cayman or elsewhere, which solicits contributions from the public or a section of the public within Cayman or elsewhere.
The law requires all NPOs (through their “controller” – trustee, director or other person who has established the NPO) to apply to the Registrar of Non-Profit Organisations for registration. Soliciting or raising contributions from the public within Cayman or elsewhere is prohibited unless the NPO is so registered. Once registered, certain information will be recorded on the register including the name, Cayman address, telephone number, the NPO’s purposes and activities and the person who owns, controls or directs the NPO. This register will be open for public inspection but financial information and the names and personal information of the controllers/senior officers will not be available. The Registrar may refuse to register an NPO if its activities do not fall within the definition, if it has been established for illegal purposes, does not have a connection with Cayman or if the information in the application is manifestly incorrect. The NPO may also have its registration cancelled if it engages in wrongdoing or contravenes the law.
The law requires the controller to keep proper financial statements in respect of money received and expended. An NPO with gross annual income of over US$250,000 that remits 30% or more overseas must have its financial statements reviewed by a qualified accountant in accordance with international standards. There are a range of penalties for non-compliance.
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The Cayman Islands – A Busy Start to 2017
This article was first published in American Lawyer.