The Cayman Islands Beneficial Ownership Regime
On 2nd March 2018, the Cabinet of the Cayman Islands government enacted two pieces of regulations which outlined a new beneficial ownership regime, referred together as the "Amending Regulations" thereafter:
- The Beneficial Ownership (Companies) (Amendment) Regulations, 2018
- The Beneficial Ownership (Limited Liability Companies) (Amendment) Regulations, 2018
These Amending Regulations modify who must comply with the beneficial ownership regime, and impose new filing obligations on previously exempt companies. Consequently, all companies and limited liability companies (LLCs) registered in the Cayman Islands have to review their obligations under the new laws to ensure compliance by the deadline of 30th June 2018.
The Companies Law, Part XVIIA - Beneficial Ownership Registers
Section 245. Scope of Application
(1) This Part applies in respect of companies incorporated or registered by way of continuation under this Law, except a legal entity or subsidiary of one or more legal entities, any of which is -
(a) listed on the Cayman Islands Stock Exchange or an approved stock exchange in Schedule 4;
(b) registered or holding a licence 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);
(c) managed, arranged, administered, operated or promoted by an approved person as a special purpose vehicle, private equity fund, collective investment scheme or investment fund, including where the vehicle, fund or scheme is a Cayman Islands exempted limited partnership;
(d) regulated in a jurisdiction included in a list published by the Anti-Money Laundering Steering Group of countries and territories whose Anti-Money Laundering legislation is deemed to be equivalent to the Anti-Money Laundering legislation of the Islands;
(e) a general partner of a vehicle, fund or scheme referred to in paragraph (c) which vehicle, fund or scheme -
(i) is registered or holds a licence under a regulatory law; or
(ii) is managed, arranged, administered, operated or promoted by an approved person;
(f) holding directly a legal or beneficial interest in the shares of a legal entity which holds a licence under the Banks and Trust Companies Law (2018 Revision), the Companies Management Law (2018 Revision), the Insurance Law, 2010, Part III of the Mutual Funds Law (2015 Revision) or the Securities Investment Business Law (2015 Revision); or
(g) exempted by the Regulations.
Section 247. Duty Of Companies To Identify Beneficial Owners
(1) Companies to which this Part applies shall take reasonable steps to identify any individual who is a beneficial owner of the company.
(2) For the purpose of identifying individuals who are beneficial owners under subsection (1), a company is entitled to rely, without further enquiry, on the response of a person to a notice in writing sent in good faith by the company, unless the company has reason to believe that the response is misleading or false.
(3) An individual (“X”) is a beneficial owner of a company (“company Y”) if the individual meets one or more of the following conditions in relation to the company-
(a) X must hold, directly or indirectly, more than 25% of the shares in company Y;
(b) X must hold, directly or indirectly, more than 25% of the voting rights in company Y;
(c) X must hold the right, directly or indirectly, to appoint or remove a majority of the board of directors of company Y.
(4) If no individual meets the conditions in subsection (3), X is a beneficial owner of company Y if X has the absolute and unconditional legal right to exercise, or actually exercises, significant influence or control over company Y through the ownership structure or interests described in subsection (3), other than solely in the capacity of a director, professional advisor or professional manager.
(5) If no individual meets the conditions in subsections (3) and (4) but the trustees of a trust (or the members of a partnership or other entity that, under the law by which it is governed is not a legal person) meet one of those conditions in relation to company Y in their capacity as such, X is a beneficial owner of company Y if X has the absolute and unconditional legal right to exercise, or actually exercises, significant influence or control over the activities of that trust (or partnership or other entity), other than solely in the capacity of a director, professional advisor or professional manager.
Section 248. Duty of companies to identify relevant legal entities
(1) A company to which this Part applies shall take reasonable steps to identify all relevant legal entities that exist in relation to the company.
(2) For the purpose of identifying relevant legal entities under subsection (1), a company is entitled to rely, without further enquiry, on the response of a legal entity to a notice in writing sent in good faith by the company, unless the company has reason to believe that the response is misleading or false.
(3) A "relevant legal entity", in relation to a company, is a legal entity that - (a) is incorporated, formed or registered (including by way of continuation or as a foreign company) in the Islands under the laws of the Islands; and (b) would be a beneficial owner of the company if it were an individual.
Section 249. Duty of companies to give notice to registerable persons
(1) a company to which this Part applies shall give notice in writing to beneficial owners and relevant legal entities identified under sections 247 and 248 and to any person that it knows or has reasonable cause to believe is a registrable person in relation to it.
Section 251. Individuals and relevant legal entities that are registrable persons
(1) The following are registrable persons in relation to a company –
(a) an individual whom the company identifies pursuant to section 247 as a beneficial owner of the company;
(b) a relevant legal entity identified by the company pursuant to section 248 that –
(i) holds an interest in the company or meets one or more of the specified conditions directly in respect of that company; and
(ii) through which any beneficial owner or relevant legal entity indirectly owns an interest in the company.
(2) Whether a person holds an interest in a company or meets a specified condition in relation to the company directly or indirectly shall be determined in accordance with the Regulations.
Section 252. Duty to establish and maintain beneficial ownership register
(1) A company to which this Part applies by virtue of section 245(1) shall keep its beneficial ownership register at the company's registered office.
(2) The following types of companies shall engage a corporate services provider to assist them to establish and maintain their beneficial ownership registers –
(a) exempted companies;
(b) ordinary non-resident companies;
(c) companies registered as special economic zone companies under the Special Economic Zones Law (2017 Revision).
If a company cannot be exempted under at least one of the instances listed in the Amending Regulations, it is in-scope and it must create a beneficial ownership register in accordance with Part XVIIA.
Section 255. Duty of company to keep register up to date
(1) If a company to which this Part applies becomes aware of a relevant change with respect to a registrable person whose required particulars are stated in its beneficial ownership register, the company shall give notice to the registrable person, as soon as reasonably practicable after it learns of the change or first has reasonable cause to believe that the change has occurred, requesting confirmation of the change.
Section 260. Access to Beneficial Ownership Information
(1) The competent authority shall establish a search platform by means of which access may be provided to information on all beneficial ownership registers maintained on behalf of companies subject to this Part by corporate services providers or the Registrar.
Section 262. Limits on searches that may be executed
(1) Subject to subsection (2), the competent authority shall execute a search of a company’s beneficial ownership register by means of the search platform if formally requested to do so by a senior official designated by name or position by the Minister, representing one of the following bodies –
(a) the financial intelligence unit, as defined in the Proceeds of Crime Law (2018 Revision);
(b) the Financial Reporting Authority, as defined in the Proceeds of Crime Law (2018 Revision);
(c) the Cayman Islands Monetary Authority;
(ca) the Anti-Corruption Commission established under section 3 of the Anti-Corruption Law (2018 Revision);
(d) the Tax Information Authority, designated under section 4 of the Tax Information Authority Law (2017 Revision); and
(e) any other body which is assigned responsibility for monitoring compliance with money laundering regulations under section 4(9) of the Proceeds of Crime Law (2018 Revision).
(2) The competent authority may only execute the search if the senior official referred to in subsection (1) certifies that the request for the search is proper and lawfully made for any purpose under the legislation governing the affairs or responsibilities of the body.
(3) The competent authority shall execute a search of a company’s beneficial ownership register by means of the search platform if formally requested to do so by the Financial Crime Unit of the Royal Cayman Islands Police Service if a senior official of the Unit certifies that the request for the search is in response to a request from a jurisdiction listed in Schedule 6 that has entered into an agreement with the Government respecting the sharing of beneficial ownership information made –
(a) by a law enforcement official designated by the agreement; and
(b) in compliance with that agreement.
Section 274. Offenses
(1) A company that knowingly and willfully contravenes section 247(1), 248(1), 252, 253(1) or (1A) or 255(2) or knowingly and willfully fails to issue a notice as required by section 249, 255 or 256(3) commits an offence and is liable on summary conviction for each such contravention –
(a) to a fine of twenty-five thousand dollars; and
(b) if the offence is a continuing one, to a fine of five hundred dollars for each day or part of a day during which the offence continues, up to a maximum of twenty-five thousand dollars.
(2) Where a company is convicted of a third offence under subsection (1), the court may order that the company be struck off the register by the Registrar in accordance with Part VI, as if it is a company that the Registrar has reasonable cause to believe is not carrying on business or is not in operation.