Different scenarios may arise under the Cayman Beneficial Owner Regime where a restrictions notice may be issued by a Cayman company subject to the Cayman Beneficial Owner Regime. Examples of these scenarios and the effect of a restrictions notice are described below.

Scenario 1

If you are familiar with the Cayman Beneficial Owner Regime, you will be aware that a Cayman company subject to the Cayman Beneficial Owner Regime is required to give notice in writing to beneficial owners and relevant legal entities identified in accordance with the provisions of the Cayman Beneficial Owner Regime and to any person that it knows or has reasonable cause to believe is a registrable person in relation to it. The notice shall require the persons to whom it is addressed, within one month of the date of receipt of the notice:

**to state whether or not they are registrable persons (as defined under the Cayman Beneficial Owner Regime)

**(if they are registrable persons) to confirm or correct any required particulars that are included in the notice and supply any required particulars that are missing from the notice

In connection with Scenario 1 above, a Cayman company subject to the Cayman Beneficial Owner Regime may send a restrictions notice to a person who has a relevant interest in that company if, by the end of the period of one month beginning with the date of receipt of the notice:

**a notice under Scenario 1 was served on the person

**the person has not (i) complied with the notice or (ii) provided the company with a valid reason sufficient to justify the person’s failure to comply with the notice; and

** the relevant interest is not subject to a security interest granted to a third party who is not affiliated with the person

Scenario 2

Another scenario is where a Cayman company subject to the Cayman Beneficial Owner Regime becomes aware of a relevant change with respect to a registrable person whose required particulars are stated in its beneficial ownership register. (Under the Cayman Beneficial Owner Regime, a “relevant change” occurs if the registrable person ceases to be a registrable person in relation to the company or any other change occurs as a result of which the required particulars stated respecting the registrable person in the company’s beneficial ownership register are materially incorrect or incomplete.) In this case, the company must 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.

In connection with Scenario 2 above, a Cayman company subject to the Cayman Beneficial Owner Regime may send a restrictions notice to a person who has a relevant interest in that company if, by the end of the period of one month beginning with the date of receipt of the notice:

**a notice under Scenario 2 was served on the person

**the person has not (i) complied with the notice or (ii) provided the company with a valid reason sufficient to justify the person’s failure to comply with the notice; and

** the relevant interest is not subject to a security interest granted to a third party who is not affiliated with the person

Scenario 3

A further set of circumstances appears to arise in relation to Scenario 2, where the company must 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. These circumstances are as follows:

(a) if a company’s corporate services provider or the Registrar, as the case may be, is of the opinion that the company has failed to comply with the notice under Scenario 2 without reasonable excuse or has made a statement to them that is false, deceptive or misleading in respect of a material particular, the corporate services provider or the Registrar, as the case may be, shall give notice of their opinion to the company.

(b) upon receipt of a notice under (a) above, the company shall provide the corporate services provider or the Registrar, as the case may be, with the missing particulars required pursuant to the notice under Scenario 2 pertaining to registrable persons and a justification or correction respecting any statement identified in the notice.

(c) if the company fails, due to the failure of a registrable person to comply with their obligations under the Cayman Beneficial Owner Regime, to provide the missing particulars referred to above within one month of receipt of the notice, the company shall issue a restrictions notice to the registrable persons whose particulars are missing with regard to the shares or other relevant interest of such registrable persons in the company and send a copy of the notice to the competent authority within two weeks of issuing it.

Effect of Restrictions Notice

In deciding whether to send a restrictions notice, the company shall have regard to the effect of the notice on the rights of persons in respect of the relevant interest, including third parties, persons with a security interest over the relevant interest, shareholders and other beneficial owners.

Unless otherwise stated under the Cayman Beneficial Owner Regime, the effect of a restrictions notice with respect to a relevant interest (shares or voting rights in the company or the right to appoint or remove a majority of the directors of the company) is as follows:

**any transfer or agreement to transfer the interest is void

**no rights are 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 right to be issued with any shares issued in respect of the relevant interest or a right to receive payment of any sums due from the company in respect of the relevant interest is void.

Offences

Unless otherwise stated under the Cayman Beneficial Owner Regime, a person commits an offence who, knowing that a relevant interest is subject to restrictions exercises or purports to exercise any right to dispose of the relevant interest or exercises or purports to exercise any right to dispose of any right to be issued with the relevant interest or votes in respect of the relevant interest (whether as holder of the interest or as proxy) or appoints a proxy to vote in respect of the relevant interest.

There are other offences under the Cayman Beneficial Owner Regime in connection with failure to comply with restrictions notices. The management of the relevant Cayman company should seek the advice of Cayman Islands legal counsel to avoid inadvertent commission of an offence.

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 alric@caymanfs.com