The Non-Profit Organisations Law (the “NPO Law”) came into force in the Cayman Islands on 1 August 2017. Accompanying regulations (the “NPO Regulations”) came into force immediately after the coming into force of the NPO Law. Controllers (persons who own, control or direct a non-profit organisation (“NPO”)) have obligations under the NPO Law. Controllers include directors of a company that is an NPO.
Existing NPOs must register with the registrar of NPOs by 31 July 2018. The application for registration as an NPO shall be made in the prescribed form by a controller of the non-profit organisation and contain the information specified in the NPO Law and regulations. Once registered, controllers have various responsibilities, some of which are as follows:
** It shall be the duty of a controller of an NPO to ensure that the Registrar is notified of any change in its purposes and activities, constitutional documents or any of the particulars entered in the register within thirty (30) days of such change
** A controller of an NPO shall cause proper financial statements to be kept of all sums of money received and expended and the matters in respect of which the receipt and expenditure relate and must ensure that the financial statements show and explain all the transactions of the NPO and disclose at any time, with reasonable accuracy, its financial position.
** Where a review of the financial statements of an NPO is required under the NPO Law, a controller of an NPO shall ensure that the report resulting from a review of the financial statements is submitted to the Registrar within nine (9) months of the end of the financial year of the NPO
** A controller shall prepare the annual returns of the NPO and submit to the Registrar
** A controller shall, on a written request by the attorney general of the Cayman Islands (the “Attorney General”) or the Attorney General’s appointee furnish financial statements in writing with respect to any matter in question at the inquiry
** Where an NPO has ceased to exist, the person who was a controller at the time of the operation of the NPO is obligated to notify the Registrar of the non-existence of the NPO
A controller who fails, without reasonable cause, to comply with the provisions for registration under the NPO Law or the provisions under the NPO Law dealing respectively with the preparation of financial statements and annual returns or a request under the NPO Law is liable to a maximum penalty of three thousand Cayman Islands dollars (approximately USD 3,659) and, in the case of a continuing breach, to a further penalty not exceeding one hundred Cayman dollars (approximately USD 122) for every day or part thereof during which the breach continues after the determination by the Registrar. The Registrar shall not impose a penalty on a controller if the Registrar is satisfied that the controller took all reasonable steps and exercised due diligence to ensure compliance with the provisions of the NPO Law.
Due to the consequences (including penalties) for non-compliance with the NPO Law, controllers of NPOs should be aware of their obligations and seek appropriate advice. A relaxed approach should not be taken to the role, even though it is a charitable one.
About the Author
Alric Lindsay is a Cayman Islands corporate/funds lawyer and an independent fund director approved by the Cayman Islands Monetary Authority and licensed under The Directors’ Registration and Licensing Law. Alric also acts as voluntary liquidator to Cayman Islands entities. Alric can be contacted at firstname.lastname@example.org