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As the 2017 hurricane season bears down upon us, those doing business in the Cayman Islands may also be feeling a rise in pressure following the implementation of a host of new legal initiatives in the jurisdiction. As part of a concerted effort by the Cayman Islands government to meet global transparency and information sharing efforts, a number of important changes to the legal and regulatory environment forecast last year are now in the process of being rolled out, and include new beneficial ownership and non-profit legislation, new listing rules for the Cayman Islands Stock Exchange (CSX), and of course future guidance for compliance with, among other things, FATCA and CRS. With these developments all on the radar at the same time as the conception of a new coalition government, it is clear that the winds of change continue to prevail in Cayman.
Perhaps the legislative development that has caught the most attention both locally and internationally is the introduction of new beneficial ownership legislation. This legislation, which came into force on July 1, 2017, requires certain Cayman corporate entities to maintain beneficial ownership registers at their registered offices, and for the information contained in such registers to be stored in encrypted form on a secure standalone search platform being established by the minister of Financial Services as the competent authority. The principal purpose of the legislation is to make beneficial ownership information normally held by corporate service providers readily accessible in response to proper and lawful requests from specified law enforcement agencies and not to materially expand existing requirements for such information. Importantly, the search platform will not be publicly accessible and may only be searched by the competent authority.
The legislation applies to every company incorporated or registered by way of continuation in Cayman unless it is, or is a subsidiary of one or more legal entities each of which is, listed on the CSX or another approved stock exchange, registered or licensed under a Cayman regulatory law, or managed, arranged, administered, operated or promoted by an approved person as a special purpose vehicle, private equity fund, collective investment scheme or investment fund or a general partner of such a vehicle, fund or scheme.
Each company to which the legislation applies has an obligation to create and maintain a register of its beneficial owners to be kept at its registered office and, in particular, is required to take reasonable steps to identify any individual who is a beneficial owner of the company and all relevant legal entities in relation to the company. For the purposes of identifying individuals who are beneficial owners or relevant legal entities, a company is entitled to rely, without further enquiry, on the response of a person or relevant legal entity to a notice sent in good faith by the company, unless the company has reason to believe that the response is misleading or false. The notice shall require the recipient to state, within one month of receipt, whether or not they should be included in the beneficial ownership register of the company and to confirm or correct any particulars included in the notice.
This article was first published in Cayman Financial Review.