As part of the Cayman Islands’ continual evolution of its regulatory environment, in 2014 the Directors Registration and Licensing Law introduced a requirement that all prospective directors of a Cayman Islands regulated corporate mutual fund must be registered or licensed with the Cayman Islands Monetary Authority (CIMA) before they are appointed as directors. This applies to individuals and corporate directors of mutual funds which are regulated by CIMA, whether they are resident in the Cayman Islands or elsewhere and also applies to directors of certain companies which are registered under an exemption to the Cayman Islands Securities Investment Business Law. If a director does not register or become licensed, the director could be exposed to heavy penalties, including fines and imprisonment.
Whether a director has to be registered or licensed depends on the number of relevant directorships that they hold. Individuals who act as director for less than 20 funds must register with CIMA. Registration is done online and involves providing certain personal details including the director’s name, address, date of birth, details of any criminal convictions involving fraud or dishonesty and any regulatory sanctions, plus the names and registration numbers of the relevant funds.
Individuals who act as director for 20 or more funds are classed as professional directors and must be licensed by CIMA unless an exemption applies. An exemption from licensing is available, for example, if the director is connected with a fund manager which is regulated by an approved overseas regulator; the director would then only need to register with CIMA rather than be licensed. License applications involve providing similar details as for registration plus completing a further questionnaire, providing details of insurance coverage and 3 references. Corporate directors of funds must also be licensed.
In each case, an application fee is payable to CIMA (which is higher for professional and corporate directors than for registered individual directors), plus annual fees which have to be paid by 15 January each year.
Details provided as part of a registration / licensing application are not publicly available although it is intended that the public will be able to search to confirm if a particular individual or entity is registered or licensed. CIMA reported that more than 8,000 directors had registered with them under the law by September 2014. Any change to the information provided in an application must be notified to CIMA online within 21 days of the change.
There remains no requirement under Cayman Islands law for a Cayman company, including a fund structured as a company, to appoint any local Cayman Islands directors or directors who are independent of the management group. Investor preference does tend however to favour funds which have at least one independent director.