The Companies Law (2018 Revision) (the “Law”) was published in the Cayman Islands Gazette on 16 March 2018. Part XVIIA of the Law deals with the establishment and maintenance of beneficial ownership registers in the Cayman Islands and submission of beneficial ownership information to the Cayman Islands competent authority via a secure, search platform, searchable only by the Cayman Islands competent authority. Part XVIIA includes some amendments, initially passed under previous versions of the Law. These changes are important and require companies to revisit previous legal advice to determine how the revised Part XVIIA impacts them, in particular, whether they satisfy the requirements for an exemption from Part XVIIA. Ultimately, companies to which Part XVIIA of the Law applies shall take reasonable steps to identify any individual who is a beneficial owner of the company and shall take reasonable steps to identify all relevant legal entities that exist in relation to the company. They must also maintain a beneficial ownership register at their registered office in the Cayman Islands. This update only discusses recent changes to Part XVIIA of the Law and new regulations introduced by the Beneficial Ownership (Companies) (Amendment) Regulations, 2018, published in the Cayman Islands Gazette on 2 March 2018.
Changes in legislation
Revision of list of types of companies exempt from requirement to establish and maintain beneficial ownership registers
The revision means that Part XVIIA only applies in respect of companies incorporated or registered by way of continuation under the 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 of the Companies Law
(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)
(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 AntiMoney Laundering legislation is deemed to be equivalent to the Anti Money Laundering legislation of the Islands (for current list of such countries, see https://www.cima.ky/list-of-equivalent-jurisdictions)
(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, the Companies Management Law, the Insurance Law, Part III of the Mutual Funds Law or the Securities Investment Business Law; or
(g) exempted by the Regulations.
The change in the types of legal entities exempt from the requirement to establish and maintain a beneficial ownership register under Part XVIIA means that some legal entities should revisit previous advice regarding the applicability of Part XVIIA.
Requiring companies exempt from the application of Part XVIIA to provide in the prescribed manner to the corporate services provider or the Registrar, as the case may be:
(a) written confirmation of the exemption identifying how it falls within an exemption under Part XVIIA and including certain prescribed information (note that the Beneficial Ownership (Companies) (Amendment) Regulations, 2018 sets out the details of prescribed information to be included); and
(b) instructions to file the written confirmation with the competent authority.
Requiring corporate services provider to regularly deposit beneficial ownership information
Corporate services providers must regularly deposit beneficial ownership information received from the companies that have engaged the provider. The Beneficial Ownership (Companies) (Amendment) Regulations, 2018 prescribe that corporate providers shall deposit with the competent authority not less than once in each month:
(a) the beneficial ownership information and the relevant information respecting a confirmation of exemption; or
(b) if the beneficial ownership information and relevant information referred to in paragraph (a) above has not changed since the prior deposit of such information, a notice that there has been no change to the information since that time.
A variation to the above rules is that the period for deposit of the beneficial ownership information and change notice is every ninety days for a company that is in liquidation and every three hundred and sixty-five days for an ordinary resident company.
Corporate service providers will be aware that the beneficial ownership information and change notice referred to above shall be deposited in the manner specified by the competent authority as being compatible with its search platform.
Addition of organisation allowed to submit a request to competent authority
The Anti-Corruption Commission established under section 3 of the Anti-Corruption Law (2016 Revision) was added as an organisation from whom the competent authority shall receive requests for a search of the secure, beneficial ownership platform, searchable only by the competent authority.
Changes in regulations
Additional duties of corporate services provider
Where a company is exempt from the application of Part XVIIA of the Law, the corporate services provider that provides registered office services to the company (or the Registrar if the Registrar provides such services) shall provide the competent authority with all relevant information from the written confirmation of the exemption provided by the company to the corporate services provider. The relevant information shall be provided by way of the search platform referred to above.
Notice of change in status of exemption
If a company that has provided a written confirmation of exemption from Part XVIIA of the Law to a corporate services provider or the Registrar becomes aware that any information in the confirmation has ceased to be true, the company shall, within one month of becoming aware of that fact, provide the corporate services provider or the Registrar, as the case may be, with:
(a) an amended written confirmation of the exemption correcting the erroneous information and including any additional information required by the Regulations;and
(b) instructions to file the amended confirmation of exemption with the competent authority.
On receipt of an amended confirmation of exemption, a corporate services provider, or the Registrar, as the case may be, shall provide the competent authority with all relevant information from the amended confirmation or exemption.
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