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Cayman Islands Beneficial Ownership Regime - Frequently Asked Questions

19/07/2017

The information below does not constitute and should not be taken as legal advice. If you would like legal advice please email your usual Harneys contact. 
 

What is a company required to do?


If your company is incorporated or registered by way of continuation in the Cayman Islands, it is required to:
  • establish and maintain a Beneficial Ownership Register; or
  • provide written confirmation and particulars confirming the basis on which it qualifies for an exemption.


What are the exemptions?


A company is not required to establish a Beneficial Ownership Register where:
  • the Company falls within one of the categories below; or 
  • the Company is a subsidiary of a legal entity that falls within one of the categories below.
    • listed on the Cayman Islands stock exchange or an approved stock exchange;
    • registered or licensed under regulatory legislation in the Cayman Islands;
    • managed, arranged, administered, operated or promoted by an approved person as a special purpose vehicle, private equity fund, collective investment scheme or investment fund;
    • regulated in a jurisdiction deemed to be equivalent to the Anti-Money Laundering legislation of the Cayman Islands;
    • a General Partner of special purpose vehicles, private equity funds, collective investment schemes or investment funds each of which are registered or holds a licence under a regulatory law.
    • a General Partner of special purpose vehicles, private equity funds, collective investment schemes or investment funds each of which must be managed, arranged, administered, operated or promoted by an approved person.
    • holding directly a legal or beneficial interest in the shares of a company, which holds a licence under the Banks and Trust Companies Law (as Revised), the Companies Management Law (as Revised), the Insurance Law (as Revised), Part III of the Mutual Funds Law (as Revised) or the Securities Investment Business Law (as Revised).


What must a company do if it qualifies for an exemption?

The company must select the appropriate exemption and complete the Beneficial Ownership Declaration.

The company must then provide the Beneficial Ownership Declaration to Harneys Fiduciary which will be filed with the Competent Authority on a monthly basis. 


What if a company qualifies for more than one exemption?


The company need only specify one type of exemption in the Beneficial Ownership Declaration.


Who is an “Approved Person”?


An approved person is a person or a subsidiary of a person that is:
  • regulated, registered or holding a licence in the Cayman Islands under a “regulatory law” (other than a company registered as an excluded person under section 5(4) of the Securities Investment Business Law (2015 Revision);
  • regulated in an equivalent legislation jurisdiction; or
  • listed on the Cayman Islands stock exchange or an approved stock exchange.


Which laws are “Regulatory Laws”?


The Banks and Trust Companies Law (2018 Revision), the Companies Management Law (2018 Revision), the Insurance Law (2010 Revision), Mutual Funds Law (2015 Revision - Part III) and the Securities Investment Business Law (2015 Revision)). 

Note: the Directors Registration and Licensing Law 2014 is excluded from the list.


Which countries are considered to have legislation “equivalent” to that of the Cayman Islands?


Argentina, Australia, Austria, Bahamas, Bahrain, Barbados, Belgium, Bermuda, Brazil, British Virgin Islands, Canada, Cyprus, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong, Iceland, India, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Liechtenstein, Luxembourg, Malta, Netherlands, New Zealand, Norway, People’s Republic of China, Portugal, Singapore, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom, United States of America. 

These countries are included in a list published by the Anti-Money Laundering Steering Group of countries and territories.


Which exchanges are “Approved Stock Exchanges”?


American Stock Exchange (AMEX), Athens Stock Exchange, Australian Securities Exchange, Barcelona Stock Exchange, Berlin Stock Exchange, Bermuda Stock Exchange, Bilbao Stock Exchange, Bolsa de Comercio de Buenos Aires, Bolsa de Comercio de Santiago, Bolsa de Valores de Caracas, Bolsa de Valores de Lima, Bolsa Italiana SPA, Boston Stock Exchange, Bursa Malaysia (including the Main Market and the ACE Market), Chicago Stock Exchange, Dusseldorf Stock Exchange, Euronext Brussels, Euronext Lisbon, Euronext NV, Euronext Paris, Frankfurt Stock Exchange, Fukoka Stock Exchange, Hamburg and Hannover Stock Exchange, Hong Kong Stock Exchange (including the Growth Enterprise Market), International Securities Exchange, Irish Stock Exchange, Johannesburg Stock Exchange, Korea Exchange (including KOSPI and KOSDAQ Market Divisions), London Stock Exchange (including AIM), Luxembourg Stock Exchange, Madrid Stock Exchange, Mexican Stock Exchange, Montreal Stock Exchange, Munich Stock Exchange, Nagoya Stock Exchange, NASDAQ, National Stock Exchange, New York Stock Exchange, New Zealand Stock Exchange, NYSE Arca, OMX Nordic Exchange, Osaka Securities Exchange, Oslo Stock Exchange, Philadelphia Stock Exchange, Rio de Janeiro Stock Exchange, São Paulo Stock Exchange (Bovespa), Shanghai Stock Exchange Shenzhen, S.E., Singapore Stock Exchange (including Catalist), Stuttgart Stock Exchange, SWX Stock Exchange, Taiwan Stock Exchange, Tel Aviv Stock Exchange, The Gretai Securities Market of Taiwan, The Stock Exchange of Thailand, Tokyo Stock Exchange, Toronto Stock Exchange, Valencia Stock Exchange, Vienna Stock Exchange.


Who is a “registrable person” and should be listed on the Beneficial Ownership Register?


Any beneficial owner (including a “deemed beneficial owner”) that, directly or indirectly, meets one of the following specified conditions:
  • holds, in aggregate, more than 25% of the shares or membership interests in the company;
  • holds, in aggregate, more than 25% of the voting rights in relation to the company;
  • holds, in aggregate, the right to appoint or remove a majority of the board of directors/managers of the company; 
  • has the absolute and unconditional legal right to exercise (or actually exercises) significant influence or control over the company;
  • exercises significant influence or control over the activities of a trust or other vehicle, other than solely in the capacity of a director (or manager), professional advisor or professional manager; or
  • any legal entity incorporated, formed or registered in the Cayman Islands (“relevant legal entity”) which holds an interest in the company or meets one or more of the specified conditions directly in respect of that company and through which any beneficial owner or relevant legal entity indirectly owns an interest in the company.

Note: certain types of vehicles which are not individuals are deemed beneficial owners, if they are:
  • a corporation sole; 
  • a government or government department of a country or territory or a part of a country or territory; 
  • an international organisation whose members include two or more countries or territories (or their governments); or
  • a local authority or local government body.


Is the company required to provide supporting documents in respect of the Beneficial Ownership Register?


No.


What does the “beneficial ownership status” on the Beneficial Ownership Declaration mean?


Confirmed” applies when the particulars below have been confirmed. 

Enquiries Pending” applies when the company is still in the process of taking reasonable steps to find out if there is anyone who is a registrable person. 

No registrable person identified” applies when:
  • the company knows or has reasonable cause to believe that there is no registrable beneficial owner or relevant legal entity in relation to the company; or 
  • the company has taken reasonable steps to identify all beneficial owners and relevant legal entities and has not, in the course of taking such steps, been able to identify any registrable person.


What if a company is waiting on particulars from a registrable person?


The company must note “Confirmations Pending” on the form in which the particulars of the beneficial owner is provided to Harneys Fiduciary.

For the avoidance of doubt, “Confirmations Pending” applies when the company has identified registrable persons and has requested that they provide their particulars. 


What are the consequences of non-compliance?


It is a criminal offence not to comply with the provisions of the legislation.

On conviction, fines may be imposed on a company that knowingly and wilfully breaches the legislation. This includes any director, manager or other officer where it is proved that the offence was committed with their consent or wilful default. Penalties of imprisonment for two years and/or fines will apply on conviction of an individual. 

Under the legislation, companies (but not registrable persons) will not be prosecuted for any act or omission which would be an offence under the legislation unless that act or omission takes place after 1 July 2018.

A registrable person who fails to comply with a notice served by a company within one month of receipt, will also potentially be committing a criminal offence. 

If a registrable person, who has a relevant interest in a company, does not respond to or comply with a notice from the company, the company may serve a Restrictions Notice on that person. The effect of which (in respect of the relevant interest) may be as follows:
  • any transfer or agreement to transfer the interest may be void;
  • no rights may be exercisable in respect of the interest;
  • no shares may be issued in respect of the interest or in pursuance of an offer made to the interest-holder;
  • except in a liquidation, no payment may be made of sums due from the company in respect of the interest, whether in respect of capital or otherwise; and
  • other than in a liquidation, an agreement to transfer (a) a right to be issued with any shares issued in respect of the relevant interest or (b) a right to receive payment of any sums due from the company in respect of the relevant interest may be void.


What are the legal obligations of Harneys Fiduciary?


Harneys Fiduciary is under no obligation to (i) establish or maintain a Beneficial Ownership Register or (ii) provide the basis of any exemption to the Competent Authority, unless instructed by the company. 


What if there are changes to the Beneficial Ownership Declaration?


The company must provide Harneys Fiduciary with an amended Beneficial Ownership Declaration within 1 month of becoming aware of any change.

If a company becomes aware of any change to information provided by its registrable persons, it must serve notice on its registrable persons to obtain details of any change to their required particulars. Upon receipt the company must instruct Harneys Fiduciary to update the Beneficial Ownership Register.

The same will apply if changes are made in relation to the status of the company. 


What are the ongoing obligations of registrable persons?


Registrable persons must notify the company within 1 month of any changes to their required particulars by providing the relevant information to allow the company to update the Beneficial Ownership Register. 

Failure to do so may be a criminal offence and/or lead to a Restrictions Notice being served on them by the relevant company.


Who can access the Beneficial Ownership Register information?


The Competent Authority has established a central register which is not open to public inspection and only accessible pursuant to a proper and lawful request made by the:
  • Financial Reporting Authority;
  • Cayman Islands Monetary Authority;
  • Tax Information Authority; or 
  • Financial Crime Unit.


Is the beneficial ownership regime part of the FATCA and Common Reporting Standards (AEOI regime)?


No. The AEOI regime is a separate initiative which has different exemptions and reporting requirements.

What happens if we do not respond to Harneys Fiduciary?

If the company fails to disclose its beneficial ownership then Harneys Fiduciary is obliged to issue a statutory notice of non-compliance to the company.

If you would like assistance with completing the Beneficial Ownership Declaration or identifying your company's registrable persons, please get in touch with your usual Harneys contact.

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