Jan 2025
The Cayman Islands are home to 118,443 active business companies as of 31 December 2023. This factsheet provides the reasons for the Cayman Islands’ popularity as a jurisdiction to structure international transactions.
Cayman Islands Company Law
Companies in the Cayman Islands are currently subject to the Cayman Companies Act (2023 Revision) (as amended) which came into force on 31 July 2024 (the Companies Act).
Incorporation
An exempted company is generally incorporated by delivery of two signed copies of the memorandum of association and articles of association, if any, to the Cayman Islands Registrar of Companies (the Registrar). Unlike some other jurisdictions, there is no requirement to publicise an intention to incorporate nor is any pre-approval from any regulatory body required. A proposed director must submit to the Registrar a signed declaration to the effect that operation of the proposed exempted company will be conducted mainly outside Cayman. The incorporation process can be completed on an express basis within 24 hours.
The constitutional documents of an exempted company are its memorandum and articles of association. The memorandum of association must specify the name and registered office of a company. It may specify the objects and may provide that business shall be restricted to furtherance of the specified objects. Unless expressly restricted by its memorandum of association, an exempted company can have unrestricted powers. An exempted company limited by shares may register articles. The articles only bind the company and its members when registered. If no articles of association are registered with the Registrar, the regulations of Table A of the Companies Act will apply as the company’s articles. The articles of association provide for the regulation of a company’s affairs and will set out the rights and duties as between the company, the shareholders and the directors. The memorandum and articles of association are not available for inspection by the public. Where articles have been registered, a copy of every “special resolution” for the time being in force must also be filed with the Registrar and either annexed to or embodied in the articles.
Capital Structures
There is no minimum authorised or issued share capital. The lowest annual government fee is payable on an aggregate authorised share capital of up to US$50,000; for an exempted company with an aggregate authorised share capital that is greater than US$50,000, a sliding scale exists rising to US$3,406.10 per annum. Fractional shares and shares with no par value may be issued. Shares may be issued fully, partly or nil paid. Bearer shares are not permitted. There is no requirement to file information relating to the issue or transfer of shares with the Registrar and the register of members of the company need not be kept at the registered office and is not available for public inspection.
Dividends
Subject to any contrary provisions in the articles of association, a company may pay dividends out of profits or its share premium account. No dividend may be paid out of the share premium account unless immediately following the payment the company is able to pay its debts as they fall due in the ordinary course of business.
Directors
The minimum number of directors of a Cayman company is one. There is no requirement that any of the directors be resident in Cayman nor is there any shareholding requirement for directors. Corporate directors are permitted. An exempted company must have such officers as are prescribed by its articles. The names and addresses of the directors and officers must be entered on a register of directors and officers and kept at the registered office. A copy of the register and notice of any change in directors or officers must be filed with the Registrar. A list of the names of the current directors can be obtained from the Registrar on payment of a fee.
Audit/Annual Return
Unless the company is subject to certain registration or licensing legislation as a result of its proposed activities, there is no requirement that it appoint auditors or file financial statements with the Registrar or any other governmental authority.
In January of each year each exempted company must furnish to the Registrar a return declaring whether there has been an alteration in the memorandum of association, confirming that the operations of the company have been conducted mainly outside Cayman and that the company has not traded in Cayman except in furtherance of its business carried on outside Cayman, and pay the annual government referred to above.
Taxation
No taxes are imposed in Cayman on an exempted company or its shareholders. On payment of a fee, an exempted company is entitled to apply for and receive an undertaking from the Cayman government such that no law enacted in Cayman imposing any tax to be levied on profits, income, gains or appreciation or which is in the nature of estate duty or inheritance tax shall apply to the exempted company, or its shares or by withholding for a period of up to twenty years, which is usually renewable for a further ten years upon expiry. Certain documents are subject to stamp duty which is generally a nominal amount. Generally, stamp duty is only payable if the document in question is executed in the Cayman Islands or brought into the Islands.
Legal Framework
Cayman is a common law jurisdiction with English common law having a persuasive role. The Grand Court of the Cayman Islands has unlimited jurisdiction over complex commercial and trust disputes, while the Court of Appeal reviews decisions from the Grand Court. The Financial Services Division of the Grand Court was created in 2009 recognising the need for special procedures and skills in dealing with the more complex civil cases that arise out of the financial sector in the Cayman Islands. The ultimate court of appeal is the Privy Council of the United Kingdom.
Squeeze Outs
The Companies Act provides a range of mechanics which enable exempted companies to merge, consolidate, restructure and effect squeeze outs. See here for further information
Lender Protection
The Companies Act requires an exempted company to maintain at its registered office a register of all mortgages and charges specifically affecting the property of the company, and enter in such register a short description of the property mortgaged or charged, the amount of the charge created and the names of the mortgagees or persons entitled to the charge. This register is open to inspection by any creditor or member of the company at all reasonable times.
Failure to maintain the register, and failure to permit inspection of the register, attracts a small fine.
Financial Assistance
There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a company to another person for the purchase of, or subscription for, its own or its holding company’s shares.
Commercial Confidentiality
The Cayman regime affords party a high degree of commercial confidentiality. As noted above, the register of members of an exempted company need not be kept at the registered office, and is not publicly available and there is no requirement to publicly file accounts.
Stable Political Environment
Cayman is a British Overseas Territory and offers a stable political environment, which provides consistency and certainty. Is it on the Organisation for Economic Co-Operation and Development’s (OECD), Financial Action Task Force (FATF), European Union and United Kingdoms “White Lists”, a recognition of the Cayman Islands as a jurisdiction which is fully committed to implementing and maintaining international anti-money laundering/counter terrorist financing (AML/CFT) compliance standards.
Conclusion
The quality and flexibility of the Cayman Companies Act, tax neutrality, legal framework and stable environment offered by a British Overseas territory, together with its elevation to the OECD, FATF, UE and UK White Lists, have all contributed to the Cayman Islands becoming the leading offshore jurisdiction to structure international transactions.